F-1/A 1 d399582df1a.htm F-1/A AMENDMENT NO. 2 F-1/A Amendment No. 2
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As filed with the Securities and Exchange Commission on December 23, 2022

Registration No. 333-267026

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

Amendment No. 2

to

FORM F-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

RELIEF THERAPEUTICS Holding SA

(Exact name of Registrant as specified in its charter)

 

 

N/A

(Translation of Registrant’s Name into English)

 

 

 

Switzerland   2834   n/a

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification No.)

Avenue de Sécheron 15

1202 Geneva

Switzerland

Tel: +41 22 545 11 16

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

 

 

The Corporation Trust Company

Corporation Trust Center

1209 Orange Street

Wilmington, DE 19801

+1-302-658-7851

(Name, address, including zip code, and telephone number, including area code, or agent for service)

 

 

Copies to:

 

Philip B. Schwartz

Andrew E. Schwartz

Akerman LLP

201 East Las Olas Boulevard

Suite 1800

Fort Lauderdale, Florida 33301

Tel: (954) 463-2700

 

Steven M. Skolnick

Lowenstein Sandler LLP

1251 Avenue of the Americas

New York, New York 10020

Tel: (212) 262-6700

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement is declared effective.

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  ☒

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering.  ☐

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 under the Securities Act of 1933.

Emerging Growth Company  ☒

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☐

 

The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to such Section 8(a), may determine.

 

 


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The information contained in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED DECEMBER 23, 2022

PRELIMINARY PROSPECTUS

4,166,666 Units Consisting of

4,166,666 American Depositary Shares

Representing 833,333,200 Ordinary Shares

and Warrants to Purchase up to 3,125,000 American Depositary Shares

 

LOGO

 

 

This is the initial public offering of our American Depositary Shares, or ADSs. Each ADS represents the right to receive 200 ordinary shares and the ADSs may be evidenced by American Depositary Receipts, or ADRs. We are selling (i) 833,333,200 ordinary shares in the form of ADSs in the United States (the “Shares”), and (ii) warrants to purchase 625,000,000 ordinary shares in the form ADSs (the “Warrants”). The Shares and accompanying Warrants will be sold in Units (each, a “Unit”), with each Unit consisting of one Share and one Warrant to purchase 0.75 of an ADS. Each whole Warrant is exercisable to purchase one ADS (each, a “Warrant Share”) at an assumed exercise price of $[*] (120% of the public offering price per unit), will be exercisable upon issuance and will expire five years from the date of issuance. This prospectus also relates to the offering of the Warrant Shares issuable upon exercise of the Warrants. The Shares and Warrants will be immediately separable upon issuance. The Units have no stand-alone rights and will not be certificated or issued as stand-alone securities.

Our ordinary shares are listed on the SIX Swiss Exchange under the symbol “RLF”. Our ordinary shares also currently trade on the over-the-counter market under the symbol “RLFTF” and our ADSs currently trade on the over-the-counter market under the symbol “RLFTD”. We have applied to list our ADSs on the Nasdaq Global Market, under the symbol “RLFT”. There can be no assurance that, even if our listing is successful, that an active trading market for our ADSs will develop or be sustained. On December 19, 2022, the last reported sale price of our ordinary shares on the SIX Swiss Exchange was 0.0288 CHF per common share, equivalent to a price of $6.20 per ADS as calculated by the official exchange rate on such date.

We estimate that the offering price per Unit will be between $5.50 and $6.50, determined by reference to the prevailing market prices of our ordinary shares on the SIX Swiss Exchange, after taking into account market conditions and other factors

There is no established public trading market for the Warrants, and we do not expect such a market to develop. We do not intend to apply for the listing of the Warrants on any national securities exchange. Without an active trading market, the liquidity of the Warrants will be limited.

 

 

We are an “emerging growth company” as that term is used in the Jumpstart Our Business Startups Act of 2012, and, as such, have elected to comply with certain reduced public company reporting requirements.

 

 

Investing in our securities involves a high degree of risk. See “Risk Factors” beginning on page 21 of this prospectus.

Neither the United States Securities and Exchange Commission nor any U.S. state securities commission has approved or disapproved of these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense.

 

     Per Unit      Total  

Public offering price

   $        $    

Underwriting discounts and commissions (1)

   $        $    

Proceeds, to us, before expenses

   $        $    
     

 

(1)

Please see “Underwriting (Conflicts of Interest)” beginning on page 189 of this prospectus for additional information regarding underwriting compensation in the offering.

We have granted an option to the underwriters, exercisable for 30 days after the date of this prospectus, to purchase up to an aggregate of 125,000,000 ordinary shares in the form of ADSs (625,000 ADSs) at the public offering price of $[*] per ADS and/or up to an additional [*] warrants to purchase up to 93,750,000 ordinary shares in the form of ADSs (468,750 ADSs) at a price per Warrant equal to $[*], less, in each case, the underwriting discounts and commissions. If the underwriters exercise this option in full, the total underwriting commission payable by us will be approximately $[*] and the total proceeds to us, before expenses, will be approximately $[*].

The underwriters expect to deliver the securities to purchasers in the offering on or about ______, 2023

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

Because Raghuram (Ram) Selvaraju, Ph.D., MBA, our Chairman, is an associated person of H.C. Wainwright & Co. LLC (“Wainwright”), the underwriter in this offering, Wainwright is deemed to have a “conflict of interest” under Rule 5121 of the Financial Industry Regulatory Authority, Inc. (“FINRA”). Accordingly, Brookline Capital Markets, a division of Arcadia Securities, LLC (“Brookline”) has agreed to act as a “qualified independent underwriter” within the meaning of FINRA Rule 5121 in connection with this offering. In its role as a qualified independent underwriter, Brookline has participated in the preparation of this registration statement and the prospectus and has exercised the usual standards of due diligence with respect thereto. For a more complete discussion of the role and compensation of the underwriter, please see the section of this prospectus entitled “Underwriting (Conflicts of Interest)”.

 

 

Sole Book Running Manager

H.C. Wainwright & Co.

Prospectus dated _____, 2022


Table of Contents

TABLE OF CONTENTS

Contents

 

PROSPECTUS SUMMARY

     1  

THE OFFERING

     17  

SUMMARY FINANCIAL DATA

     19  

RISK FACTORS

     21  

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

     65  

MARKET, INDUSTRY AND OTHER DATA

     67  

TRADEMARKS AND SERVICE MARKS

     67  

USE OF PROCEEDS

     68  

DIVIDEND POLICY

     69  

CAPITALIZATION

     70  

DILUTION

     71  

SELECTED FINANCIAL DATA

     73  

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     75  

BUSINESS

     88  

MANAGEMENT

     138  

EXECUTIVE COMPENSATION

     144  

RELATED PARTY TRANSACTIONS

     149  

PRINCIPAL SHAREHOLDERS

     150  

DESCRIPTION OF SHARE CAPITAL AND ARTICLES OF ASSOCIATION

     151  

COMPARISON OF SHAREHOLDER RIGHTS

     163  

DESCRIPTION OF AMERICAN DEPOSITORY SHARES

     170  

SHARES AND ADSs ELIGIBLE FOR FUTURE SALE

     182  

TAXATION

     184  

UNDERWRITING (CONFLICTS OF INTEREST)

     192  

EXPENSES RELATED TO THIS OFFERING

     199  

LEGAL MATTERS

     199  

EXPERTS

     199  

SERVICE OF PROCESS AND ENFORCEMENT OF JUDGEMENTS

     200  

WHERE YOU CAN FIND MORE INFORMATION

     200  

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

     202  

 

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We are responsible for the information contained in this prospectus and in any free writing prospectus we prepare or authorize. We have not, and the underwriters have not, authorized anyone to provide you with different information, and we and the underwriters take no responsibility for any other information others may give you. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than its date.

Our jurisdiction of incorporation is Switzerland, and our registered office is in Geneva, Canton of Geneva, Switzerland. A majority of our outstanding securities that are registered in our share register are owned by non-U.S. residents. Under the rules of the U.S. Securities and Exchange Commission, or the SEC, we are currently eligible for treatment as a foreign private issuer. As a foreign private issuer, we will not be required to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. domestic issuers whose securities are registered under the Securities Exchange Act of 1934, as amended, referred to herein as the Exchange Act.

We own trademarks for Relief Therapeutics in Switzerland. All other trade names, trademarks and service marks of other companies appearing in this prospectus are the property of their respective holders. Solely for convenience, the trademarks and trade names in this prospectus are referred to without the ® and symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend to use or display other companies’ trademarks and trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

Our reporting currency is the Swiss franc. In this prospectus, unless otherwise specified, all monetary amounts are in Swiss francs, all references to “CHF” and “Swiss francs” mean Swiss francs and all references to “U.S. dollars,” “$,” “US$” and “USD” mean United States dollars. Throughout this prospectus, references to ADSs mean ADSs or ordinary shares represented by such ADSs, as the case may be.

We present our consolidated financial statements in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB. Readers of this prospectus should note that there may be certain differences between the presentation of our financial position, results of operations and cash flows under IFRS and U.S. generally accepted accounting principles.

 

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PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. Because it is only a summary, it does not contain all of the information that you should consider before investing in our securities, and it is qualified in its entirety by, and should be read with, the more detailed information appearing elsewhere in this prospectus. You should read the entire prospectus and the registration statement of which this prospectus is a part carefully and in their entirety, including the information discussed under “Risk Factors,” “Business,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the related notes included elsewhere in this prospectus, before deciding to buy our ADSs. Unless the context requires otherwise, references in this prospectus to the “Company,” “Relief,” “Relief Therapeutics” “we,” “us” and “our” refer to RELIEF THERAPEUTICS Holding SA and its wholly-owned subsidiaries.

Company Overview

We are a Swiss, commercial-stage biopharmaceutical company identifying, developing and commercializing novel, patent protected products in selected specialty, rare and ultra-rare disease areas on a global basis.

We currently focus on three therapeutic areas where we can best leverage our internal know-how and assets: Rare Metabolic Disorders, Rare Skin Diseases and Rare Respiratory Diseases. We are developing a direct commercial footprint in the United States (U.S.) and in Europe (EU), coupled with a strong network of commercial partners in the other major territories.

We leverage our internal R&D laboratories and track record in drug delivery systems and technologies to identify and take to market reformulated and/or repurposed drugs with a history of proven human safety and efficacy using a lean and capital efficient organization where all key strategic functions are internalized, combined with an optimized network of outsourced service providers for various development activities.

Our products and product candidates are intended for patients and care givers dealing with specialty, rare and ultra-rare debilitating diseases, by offering them novel treatment options engineered with patented drug delivery systems or repurposed and optimized drugs, to help them live their best possible lives and achieve their full potential.

We are led by a proven and seasoned management team of business leaders with significant experience and track records of success in discovering, developing and commercializing important new medicines, delivering them to the market and maximizing shareholder value. Collectively, the members of our management team have overseen research and development of products, supporting regulatory approvals and commercial launches of marketed products.

Our diversified portfolio comprises a rare disease product that is commercialized in the EU and that we launched in the U.S. in the last quarter of 2022, as well as a pipeline of products at various stages of development that are focused on rare and specialty diseases in selected therapeutic areas. In addition, the Company is commercializing several legacy products via licensing and distribution partners:

 

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LOGO

We are actively pursuing a strategy to diversify our portfolio and are continuously evaluating in-licensing and partnering opportunities. To bring assets to the market as quickly as possible, we are seeking partnerships with, or acquisitions of, companies that have late-stage clinical molecules with a strong human safety profile, allowing for relatively short, capital-efficient clinical trials with clear endpoints. Our focus on rare diseases with significant unmet medical need allows us to maintain a lean organization, with a strong, experienced leadership able to deliver growth by effectively managing partnerships and efficiently allocating capital across the portfolio.

 

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RARE METABOLIC DISORDERS

PKU GOLIKE®

PKU GOLIKE® is being commercialized for the treatment of phenylketonuria (“PKU”), a rare inherited disorder affecting approximately 350,000 patients in the world’s key markets. PKU is caused by a defect of the enzyme needed to break down phenylalanine, leading to a toxic buildup of phenylalanine from the consumption of foods that contain protein or aspartame. Excessive levels of phenylalanine in the blood results in its accumulation in the brain, which hinders brain development and results in neurophysiological dysfunction. To avoid these serious consequences, people with PKU must comply with a strict diet that limits phenylalanine from infancy onwards.

Patients with PKU require supplementation of amino acids formulated as foods for special medical purposes (“FSMP”) to prevent protein deficiency. Currently available FSMPs lead to poor or suboptimal clinical outcome and compliance because they are too rapidly absorbed and are characterized by the unpleasant odor and aftertaste of most FSMPs, which contributes to barriers to social interaction for PKU patients, their compliance with these FSMPs is poor, exposing them to the risks of poor disease control.

PKU GOLIKE®, engineered with the patent protected, proprietary drug delivery technology named “Physiomimic” is the first prolonged release amino acid mix product that (i) mimics the absorption profile of dietary proteins while (ii) offering an effective taste and odor masking. With these characteristics, PKU GOLIKE® is a uniquely differentiated product, offering improved metabolic management and the opportunity for better compliance for PKU patients of all age groups.

PKU GOLIKE® is currently sold by our direct sales and marketing organization in the U.S., Germany, Italy, Switzerland and Austria, and is marketed in the UK, Spain and Portugal by local distributors. PKU GOLIKE® is a fully reimbursed treatment option and is considered a life-saving option for PKU patients.

Relief plans to expand the PKU GOLIKE® commercial infrastructure beyond the current countries to increase and accelerate future growth. This will be supported by newer formulations of PKU GOLIKE®, such as fruit based protein bars. In addition, in October 2022, Relief launched the PKU GOLIKE® family of products in the U.S., with its recently assembled commercial infrastructure and team.

On August 23, 2022, we were issued U.S. Patent No. 11,419,837, which covers certain formulations of PKU GOLIKE® and supplements the PKU GOLIKE® intellectual property portfolio, which includes U.S. Patent No. 10,500,180, which was issued on December 10, 2019. The patents will expire no earlier than September 27, 2036 with the payment of all prescribed maintenance fees.

In the U.S., PKU Golike has been granted Orphan Drug Designation (“ODD”) for its development as an orphan prescription drug. We have since determined not to pursue this project, APR-OD031, as a prescription project and will maintain PKU GOLIKE solely as a medical food.

ACER-001

In March 2021, Relief signed a collaboration and license agreement with Acer Therapeutics Inc. (“Acer”) for the worldwide development and commercialization of ACER-001.

 

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ACER-001 is a proprietary powder formulation of sodium phenylbutyrate (“NaPB”). The formulation is designed to be both taste masked and immediate release. ACER-001 is being developed using a microencapsulation process for the treatment of various inborn errors of metabolism, including Urea Cycle Disorders (“UCDs”) and Maple Syrup Urine Disease (“MSUD”). ACER-001 microparticles consist of a core center, a layer of active drug, and a taste-masking coating that quickly dissolves in the stomach to avoid a bitter taste while still allowing for rapid systemic absorption. ACER-001’s taste-masked formulation is designed to improve the palatability of NaPB and could make it a compelling alternative to existing NaPB-based treatments, as the unpleasant taste associated with NaPB is cited as a major impediment to patient compliance with those treatments. Additionally, bioequivalence trials have shown ACER-001 to have similar relative bioavailability to BUPHENYL® under both fasted and fed conditions.

The companies will split net profits from ACER-001 from Acer’s territories (consisting of the United States, Canada, Turkey, Japan, and Brazil) 60%:40% in favor of Relief. In addition, Relief has licensed the rights for the rest of the world, where Acer will receive from Relief a 15% royalty on all revenues received in Relief’s territories.

ACER-001 in UCDs

UCDs are a group of disorders caused by genetic mutations that result in a deficiency in any one of the six enzymes that catalyze the urea cycle, which can lead to an accumulation of ammonia in the bloodstream, a condition known as hyperammonemia. Primary hyperammonemia is a term to describe an elevation of ammonia in blood or plasma due to a defect within the urea cycle, which is the pathway responsible for ammonia detoxification and arginine biosynthesis. Urea cycle disorders (UCDs) are rare diseases caused by genetic defects affecting any of the six enzymes or two transporters that are directly involved in the urea cycle function. The clinical situation is variable and largely depends on the time of onset. Newborns who are often affected by hyper-ammonaemic encephalopathy carry a potential risk of severe brain damage, which may lead to death. Outside the neonatal period, symptoms are very unspecific but most often neurological (with wide variability), psychiatric and/or gastrointestinal. Early identification of patients is extremely important to start effective treatment modalities immediately. The acute management includes detoxification of ammonia, which often requires extracorporeal means such as hemodialysis, and the use of intravenous drugs that work as nitrogen scavengers. Long-term management of patients with UCDs consists of a low-protein diet, which needs to be balanced and supplemented to avoid deficiencies of essential amino acids, trace elements or vitamins and the use of nitrogen scavengers.

The current treatment of UCDs consists of dietary management to limit ammonia production in conjunction with medications that provide alternative pathways for removing ammonia from the bloodstream. Some patients may also require individual branched-chain amino acid supplementation.

Current medical treatments for UCDs include nitrogen scavengers, RAVICTI® and BUPHENYL®, in which the active pharmaceutical ingredients are glycerol phenylbutyrate (“GPB”) and NaPB, respectively. Their role is to provide an alternative way to excrete excessive nitrogen. According to a 2016 study by Shchelochkov et al., published in Molecular Genetics and Metabolism Reports, while nitrogen scavenging medications have been shown to be effective in helping to manage ammonia levels in some patients with UCDs, non-compliance with treatment is common. Reasons referenced for non-compliance associated with some available medications include unpleasant taste, the frequency with which medication must be taken, the number of pills, and the high cost of the medication.

The U.S. Food and Drug Administration (“FDA”) has accepted for review Acer’s New Drug Application (“NDA”) resubmission under the 505(b)(2) pathway for ACER-001, for oral suspension, for the treatment of patients with UCDs. The FDA designated the NDA as a Class 2 resubmission and set a PDUFA target action date of January 15, 2023. Assuming the NDA is approved, Relief anticipates commercialization of ACER-001 for UCDs in the U.S. in the first half of 2023, pursuant to FDA approval in early 2023, after which Relief, in accordance with its collaboration agreement with Acer, intends to submit a Marketing Authorization Application for approval of ACER-001 for the treatment of UCDs in the U.K. and EU. There can be no assurance, however, that ACER-001 will be approved for commercialization in any of these territories.

ACER-001 in MSUD

MSUD is a rare inherited disorder caused by defects in the mitochondrial branched-chain ketoacid dehydrogenase complex, which results in elevated blood levels of the branched-chain amino acids (“BCAA”), leucine, valine, and isoleucine, as well as the associated branched-chain ketoacids (“BCKA”) in a patient’s blood. Left untreated, this can result in neurological damage, mental disability, coma or death.

There are currently no approved pharmacologic therapies in the U.S. or the European Union for MSUD. Treatment of MSUD consists primarily of a severely restricted diet to limit the intake of BCAA, with aggressive medical interventions when blood levels of BCAA or BCKA become elevated.

 

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NaPB is approved for people with UCDs to control their ammonia levels in conjunction with a restricted diet. People with UCDs who are treated with NaPB have been found to have a BCAA deficiency, despite adequate dietary protein intake. Based on this clinical observation, NaPB is being explored as a treatment to lower BCAA and their corresponding BCKA in patients with MSUD.

The FDA and EMA have granted Orphan Drug Designation to ACER-001 for the MSUD indication.

Acer has also been issued several patents protecting the usage of and composition of ACER-001. The recent approval of U.S. Patent No. 11,202,767 covers methods of use claims related to ACER-001’s multi-particulate dosage formulation for oral administration for the potential treatment of UCDs and MSUD and supplements previous issuance of U.S. Patent No. 11,154,521 which covers pharmaceutical composition claims of ACER-001. The patents will expire no earlier than October 17, 2036 with the payment of all prescribed maintenance fees.

Acer has submitted an Investigational New Drug (“IND”) application to the FDA to evaluate the safety and efficacy of ACER-001 for the potential treatment of MSUD. Clinical studies are expected to begin in the fourth quarter of 2022. Relief believes that if these studies are successful, the data from these studies will be suitable for product registration in the U.S. and Europe.

 

*

RAVICTI® and BUPHENYL® are registered trademarks owned by or licensed to Horizon Therapeutics plc.

APR-OD032 in PKU

Through a definitive agreement with Meta Healthcare Ltd. (“Meta”), Relief has acquired the worldwide rights, title and interest, except in the UK, for a novel dosage form of a prescription drug already approved by the FDA and intended for the treatment of patients with PKU. This improved product is expected to increase patient acceptance and compliance as well as secure easy metered dosing and dispensing. Meta will provide the technology transfer package, while Relief will conduct clinical studies, manufacturing, regulatory submission and commercialization in the U.S. and EU.

According to the terms of the purchase agreement, Meta shall transfer to Relief all data, know-how, as well as any intellectual property as developed or generated so far by Meta. Relief shall only be responsible for funding the remaining development work as well as for filing and prosecuting a new drug application in all countries worldwide except for the UK where Relief shall grant a license back to Meta, enabling Meta to market the product in such country. Other than the initial acquisition payment and low double-digit royalty payments on net profit of the product in the various countries, Relief shall be under no obligation to fund or pay any other amount to Meta.

Relief anticipates filing with the FDA an investigational new drug (“IND”) application sometime in the first quarter of 2023 and a filing for registration approval through a 505(b)(2) NDA sometime before the end of 2023. There can be no assurance that such filings will be made or that they will be accepted by the FDA.

 

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Rare pulmonary diseases

RLF-100® (AVIPTADIL)

RLF-100® (aviptadil) is a synthetic form of Vasoactive Intestinal Peptide (VIP) consisting of 28 amino acids, which was first discovered in 1970. Although initially identified in the intestinal tract, human VIP is now known to be produced throughout the body and to be primarily concentrated in the lungs. Here, VIP has shown a multimodal mechanism of action: decrease of inflammatory cytokines release leading to prevention of cytokine storm syndrome and viral replication, immunomodulating effect, vasodilating and bronchodilating effects, and prevention of surfactant depletion. Seventy percent of VIP in the body is bound to a less common type of cell in the lung, the alveolar type 2 cell, which is critical to the absorption of oxygen into the body.

RLF-100® has a 20-year history of safe use in humans in multiple human trials for sarcoidosis, idiopathic pulmonary fibrosis, asthma, pulmonary arterial hypertension, and sepsis-induced acute respiratory distress syndrome. A combination of aviptadil with phentolamine is approved for the treatment of erectile dysfunction by intra-cavernous injections in countries outside the U.S.

In July 2021, Relief acquired AdVita Lifescience GmbH (“AdVita”), a Germany-based privately held pharmaceutical company developing products for the treatment and diagnosis of rare lung diseases. Relief believes that AdVita’s capabilities will help the Company to further progress the development of RLF-100® for a range of lung diseases. Relief plans to develop RLF-100® in the treatment of pulmonary sarcoidosis, non-COVID-19-related Acute Respiratory Distress Syndrome (“ARDS”), checkpoint inhibitor-induced pneumonitis (“CIP”), and chronic berylliosis. There can be no assurance that Relief can successfully develop RLF-100 for any of these indications.

Relief recently announced promising six-month stability data on a new formulation of RLF-100® (aviptadil) developed by Relief and is evaluating the opportunity to file for additional patent protection for RLF-100® and has filed a new provisional patent application for RLF-100.

RLF-100® MULTIMODAL MECHANISM OF ACTION

 

LOGO

 

   

Vasoactive Intestinal Peptide (VIP or RLF-100®) is produced throughout the body but it is primarily concentrated in the lungs where 70% of VIP bound to AT2. Aviptadil is a human peptide consisting of 28 amino acids

 

   

Exogenously applied RLF-100 accumulates in the lung with an extended half-life (half-life ~19 minutes)

 

   

20-year+ history of safety in humans

 

   

Binding to G protein-coupled receptors VPAC1, VPAC2 and PACAP-R1 triggers intracellular signaling

 

   

Highest density of receptors VPAC1 found in AT2

 

   

Significant modulation of the immune cell response (macrophages, CD4-T cells and tolerogenic dendritic cells) mediated by activation of the VPAC1 and VPAC2 receptors

 

   

Anti-inflammatory and immunomodulatory roles g immune cells

 

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Decreases pro-inflammatory cytokines (TNF-α, IL-6, INF-g, etc.)

 

   

Increases expression of IL-10 and TGF-ß

 

   

Vasodilatory and inotropic effects g vascular system

 

   

Decreases vascular resistance

 

   

Significantly increases arterial blood flow

 

   

Primary positive ionotropic effect on cardiac muscle

 

   

Maintenance of bronchial system g lung

 

   

Upregulates the production of surfactant

 

   

Prevents cell death

 

   

VIP mice display airway hyper-responsiveness to noxious stimulus

 

   

Reduce replication of SARS-CoV-2 virus in AT2 and monocytes

RLF-100® in COVID-19 RELATED ARDS

Previously, we partnered with NeuroRx, Inc. (“NeuroRx”) to develop RLF-100® for the treatment of COVID-19. In March 2020, at the beginning of the first wave of the pandemic in the United States, NeuroRx submitted an IND application to the FDA for a phase 2b/3 trial of intravenous (“IV”) RLF-100® for the treatment of patients with critical COVID-19 respiratory failure. Within 24 hours, the FDA issued a “Study May Proceed” letter and the first patients were treated in April 2020 at Thomas Jefferson University Hospital in Philadelphia.

In September 2020, we entered into a binding collaboration agreement with NeuroRx (the “Collaboration Agreement”) which established the terms under which both parties would collaborate and assist each other to maximize the commercial value of each parties’ territories related to intravenous and inhaled aviptadil for the treatment of COVID-19 and other related pulmonary conditions. As per the collaboration agreement, NeuroRx would be responsible for developing and commercializing the product in the United States, Canada and Israel and Relief would do the same for the EU, Switzerland, Iceland, Norway, the U.K., the Channel Islands, Lichtenstein, Monaco, Andorra, San Marino and Vatican City. The collaboration agreement also stipulated that it would be conducted on an exclusive basis and that neither party could develop or commercialize any product competitive with RLF-100®.

In late 2020, a phase 2b/3 clinical study with intravenous RLF-100® in patients with COVID-19 induced ARDS was completed in the U.S. by NeuroRx. In its press release reporting those results, NeuroRx announced that across all patients and sites, the RLF-100® IV treated cohort met the primary endpoint for successful recovery from respiratory failure at days 28 (p=0.14) and 60 (p=0.13) and had a meaningful survival benefit after controlling for ventilation status and clinical site. However, they also reported that the trial did not demonstrate a statistically significant difference on the study’s primary endpoint without statistical adjustment for these pre-specified covariates. On the basis of these findings, NeuroRx announced on June 1, 2021 that it had applied to the FDA for Emergency Use Authorization (“EUA”) for RLF-100 for the treatment of acute respiratory failure due to critical COVID-19 and that it planned to submit an NDA with the FDA.

While we received a phase 2b/3 Study Report summary from NeuroRx, NeuroRx refused to share the full clinical trial data package, which has prevented us from moving forward to seek approval for the product in its territories. Further, on November 5, 2021, NeuroRx announced that the FDA had declined its application for EUA of IV aviptadil for the treatment of acute respiratory failure due to critical COVID-19. Subsequent applications filed by NeuroRx with the FDA seeking EUA for more limited use of the product for the treatment of COVID-19 and for breakthrough therapy designation for the product were also denied in the first half of 2022.

 

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In March 2021, NeuroRx announced that RLF-100 administered as an IV infusion was also included in a National Institute of Health sponsored phase 3 ACTIV-3b/TESICO clinical trial in severely ill patients with COVID-19. In May 2022, Relief learned that trial had been discontinued by its Data Safety Monitoring Board based on futility. Relief intends to obtain and review all available clinical data, including data from the NIH-sponsored trial in order to better understand the results observed, up to and including the point at which the study was discontinued. While regulatory approval in COVID-19-induced ARDS has not been granted in the U.S., intravenous aviptadil was approved in this indication in India for an unrelated pharmaceutical company in early 2022, thereby substantiating Relief’s original hypothesis.

Based on numerous breaches of the Collaboration Agreement by NeuroRx, in October 2021, Relief filed a lawsuit against NeuroRx and its then CEO, Dr. Jonathan Javitt, for multiple breaches of the Collaboration Agreement. The complaint was filed in the Supreme Court of the State of New York in Manhattan.

The complaint alleged that the defendants are in breach of numerous provisions of the Collaboration Agreement. The complaint, among other remedies, sought damages, an order compelling defendant to comply with multiple provisions of the Collaboration Agreement, and a declaration directing NeuroRx to deliver the entire data set from the Phase 2b/3 clinical trial of intravenously-administering aviptadil to Relief. On January 10, 2022, NeuroRx filed a complaint against Relief alleging that the Company was in breach of the Collaboration Agreement and had thus repudiated and cancelled the Collaboration Agreement. Additionally, NeuroRx’s claims included a count for defamation.

On November 14, 2022, Relief and NRx issued a press release announcing that the parties had entered into a definitive settlement agreement to resolve all matters relating to the pending litigation. As part of the settlement, at a closing that was held on December 19, 2022, (i) NRx transferred to Relief all of the assets that it previously used in its aviptadil development program, including its regulatory filings, patent applications, clinical data, and the formulation of the aviptadil product it was previously developing, (ii) Relief has the exclusive right and control going forward to develop and commercialize an aviptadil product, (iii) Relief has agreed to use commercially reasonable efforts to continue the existing Right to Try Program for aviptadil in the United States for at least 2 years, (iv) Relief will pay NRx milestone payments if it can successfully obtain commercial approval of an aviptadil product (whether for COVID-19 or any other indication), (v) Relief will pay NRx royalties based on a percentage of future sales of an aviptadil product (whether for COVID-19 or any other indication), up to a maximum of $30 million in the aggregate, (vi) NRx Pharmaceuticals has agreed not to compete in the development of an aviptadil product in the future, and (vii) Relief and NRx Pharmaceuticals have dismissed their pending litigation.

Inhaled RLF-100® is being evaluated in an investigator-initiated trial at a site in Switzerland for the treatment of ARDS associated with COVID-19 (the “Leuppi Study”). While the study is in an advanced stage act recruitment, changing disease patterns have hindered the completion of patient recruitment.

RLF-100® ADDITIONAL OPPORTUNITIES:

It is our objective to establish RLF-100® as the standard of care for the prevention and treatment of respiratory failure and its complications in both the acute Intensive Care and chronic ambulatory settings.

Since RLF-100®’s mechanism of action is not restricted to the protection of AT2 cells, we believe that its beneficial effects could extend to other types of ALI as supported by preclinical and preliminary clinical data in sepsis-induced ALI.

Pulmonary sarcoidosis

Relief has been granted ODD by the FDA for inhaled RLF-100 for the treatment of pulmonary sarcoidosis. We intend to initiate a phase 2b dose-ranging study in 54 patients with pulmonary sarcoidosis using inhaled RLF-100® administered over a 12-week period, following which patients will have the option to participate in the extension phase. A pre-IND meeting with the FDA is planned to confirm the efficacy and safety endpoints as well as the proposed dosing regimen and, based on a positive outcome, the trial is expected to begin during 2023. There can be no assurance that this trial will be successful.

 

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Additional Indications

RLF-100® is under development in both inhaled and intravenous formulations for other acute and chronic lung diseases, including as a treatment for checkpoint inhibitor-induced pneumonitis (“CIP”), an indication in which Relief received a Swiss method-of-use patent protection related to the inhaled formulation of RLF-100® extending into at least 2039. We also plan to evaluate RLF-100® for the treatment of non-COVID-19-related ARDS with a particular focus on infectious ARDS. There are also plans to conduct European proof-of-concept clinical studies with inhaled RLF-100 for the treatment of chronic berylliosis, an orphan lung disease for which there are no treatments approved and which is characterized by severe inflammation of the lungs, coughing and increasing breathlessness (dyspnea).

Sentinox

Sentinox, a novel nasal spray, is a EU-cleared Class III medical device intended to offer additional protection against airborne viruses and bacteria and their transmission, including, but not limited to, SARS-CoV-2. Sentinox was evaluated in a randomized, controlled clinical trial to establish the efficacy and safety of the product in reducing viral load in the upper respiratory airways in recently COVID-19 infected individuals. The final results were reported in March 2022. Although the primary endpoint was not reached due to the small sample size, the results suggest the potential efficacy of Sentinox in the reduction of the nasal viral load, negativization, and infectivity and confirmed its safety and tolerability.

While Sentinox is approved in the European Union, it is not being marketed, as we do not consider the set of approved claims to be sufficient to differentiate Sentinox from its competitors and offer a strong competitive advantage. As a result, we plan to start a confirmatory, controlled clinical trial in the prevention of viral and bacterial airborne infections in the fourth quarter of 2022. There can be no assurance that this trial, if undertaken, will be successful.

Rare Connective Tissue Disorders

Nexodyn®

Nexodyn® Acid-Oxidizing Solution (“AOS”) is a TEHCLO®-based product proven to restart healing in chronic wounds by creating an ideal microenvironment to sustain the physiological healing process. A wealth of evidence and real-world experience has consistently shown accelerated wound closure with reduced infection rates and less wound-associated pain.

The three main features of Nexodyn® are: highly pure and stabilized hypochlorous acid (HClO >95% of free chlorine species), acidic pH (2.5 - 3.0) and high Reduction-Oxidation Potential (ORP 1.000 - 1.200 mV). The product is a sprayable solution with ancillary antimicrobial properties intended for use in the debridement, irrigation, cleansing and moistening of acute and chronic wounds (e.g., diabetic foot ulcers, pressure ulcers and vascular ulcers), post-surgical wounds, burns and other lesions. The product is certified in the EU as a Class III medical device and is certified as a 510(k) medical device in the U.S.

APR-TD011

APR-TD011 is indicated for the treatment of epidermolysis bullosa (“EB”), a group of rare, genetic, life-threatening connective tissue disorders characterized by fragile skin and mucous membrane with severe blistering throughout the body. It is estimated that the overall prevalence for EB could be as high as 95.61 per million in the U.S. with similar number in Europe, equating to approximately 25,000 patients in the U.S. and 40,000 in the European Union.

 

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APR-TD011 is a differentiated acid oxidizing solution of hypochlorous acid. The TEHCLO® proprietary technology, upon which the drug has been developed, allows for a sprayable solution that combines strong antimicrobial action with anti-inflammatory properties, thereby allowing for infection control, reduction of wound colonization, alleviation of pain and itching and improved wound healing. The spray formulation permits wound application while avoiding skin contact and cross-contamination. APR-TD011 represents the first product specifically developed for EB patients that provides a complete treatment to prevent or reduce infections and inflammation via modulation of the wound microenvironment to accelerate a faster physiological wound healing rate.

APR-TD011 has been granted Orphan Drug Designation by the FDA for the treatment of EB. In a preliminary clinical trial, EB patients administered with APR-TD011 demonstrated improvement in skin blistering and tissue repair within just two weeks of treatment, and the product candidate was shown to be well tolerated with a favorable safety profile. A phase 2 investigator-initiated clinical trial was initiated in September 2022. There can be no assurance that this trial, if commenced, will be successful.

APR-TM011

APR-TM011 is currently approved in the EU as a Class III Medical Device for the treatment of skin lesions and toxicities induced by cancer treatments, including anti-Epidermal Growth Factor Receptors (“anti-EGFR”) Monoclonal Antibodies, such as Cetuximab. The use of anti-EGFR inhibitors causes papulopustular manifestations due to their interference of epidermal growth factor receptor signaling in the skin and poses a high risk of secondary infections. Following commercial assessment, we plan to conduct a follow-on clinical study for product approval in Europe as a Class III Medical Device beyond 2024, when the new EU device regulations will apply. This clinical study would be a multi-center, post-market, double-blind, placebo-controlled trial to evaluate the efficacy, safety and tolerability of APR-TM011 in the management of skin lesions and reactions resulting from anti-EGFR Monoclonal Antibodies and/or radiotherapy treatments in oncology patients. There can be no assurance that this trial, if commenced, will be successful.

Legacy Products

Legacy products were originally developed by APR and licensed for commercialization. The rights were acquired by Relief as part of the 2021 acquisition of APR.

SetoFilm/Ondissolve

SETOFILM is the first prescription-only, orodispersable film (“ODF”) medicine approved in Europe and Canada. The product is indicated for radiotherapy-induced nausea and vomiting (“RINV”), chemotherapy-induced nausea and vomiting (“CINV”), as well as post-operative-induced nausea and vomiting (“PONV”) in both adults and children of 6 months of age or older. The product has been formulated and developed using the RapidFilm drug delivery technology in the form of a soluble film and is available in 4mg and 8mg doses. Once placed on the tongue, it dissolves in a few seconds and is swallowed with saliva, without the need for water. The convenience provided by the innovative ODF formulation reduces patient pill burden, enhances compliance and avoids risks of suffocation in children.

The product is marketed in Europe by Norgine B.V. and in Canada by Takeda Pharmaceuticals, under license from APR.

 

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CAMBIA

Diclofenac potassium is an off-patent, potent non-steroidal anti-inflammatory drug (“NSAID”) widely used for treating inflammatory conditions and pain management. By applying its patented dynamic buffering technology (“DBT”), APR developed the first and only NSAID approved by the FDA for the treatment of acute migraine attacks in adults. The product is currently marketed as CAMBIA by Assertio Therapeutics Inc. (Nasdaq: ASRT) in the U.S. and Miravo Healthcare (formerly Nuvo Pharmaceuticals Inc.) in Canada, under an exclusive, royalty bearing license agreement with APR.

CAMBIA is protected by a patent family owned by APR and listed in the FDA Orange Book having expiration in 2026; however, the Company is expecting first generic competition to start sometime in 2023.

Voltadol

Developed with APR’s patented matrix patch technology, Voltadol is a topical, locally applied and locally acting patch containing and delivering diclofenac sodium, an off-patent, potent non-steroidal anti-inflammatory drug (“NSAID”) for the local treatment of painful, acute conditions such as muscle and joint strains. The product is marketed in various countries as an over-the-counter medicine by GlaxoSmithKline (GSK) which recently spun-off the rights to Haleon. APR was issued U.S. Patent No. 11,260,026, entitled “Ready to Use Diclofenac Packs” on March 1, 2022.

Collaboration with InveniAI

On November 23, 2021, we entered into a collaboration agreement with InveniAI LLC (“InveniAI”), a U.S. based company that has pioneered the application of artificial intelligence and machine learning across the biopharmaceutical and other industries, in order to identify promising drug candidates to treat rare and specialty diseases (the “Collaboration Agreement”).

Under the terms of the Collaboration Agreement, InveniAI will use its proprietary platform for the identification of potential pharmaceutical product opportunities and the related development pathway in select therapeutic areas by using its Pharma Big Innovation Data Lab, consisting of: (i) its proprietary AlphaMeld platform, a cloud-based artificial intelligence platform that uses its proprietary machine learning and deep learning based neural networks; (ii) its cross-functional teams at its Integrated Center of Excellence; and (iii) domain expertise, particularly with respect to detailed understanding of the pathophysiology of a wide range of therapeutic indications that are of strategic interest to Relief.

Capital Resources

As of December 31, 2021, we had cash and cash equivalents of approximately CHF 44.8 million. As of December 19, 2022, we had cash and cash equivalents of approximately CHF 19.9 million.

Based on current financial projections and available cash, we expect that we have sufficient resources to fund operations into the third quarter of 2023, not taking into account the proceeds from this offering.

Accelerated growth strategy, potential milestone payments, and acquisitions will require significant additional funding. Our ability to pursue and finance our operations and our intended development plans depends on our ability to raise capital. There can be no assurance that our commercialization efforts will be successful or if we need additional funding in the future, whether such funding will be available to us.

 

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Corporate Strategy

We intend to leverage our internal R&D capabilities and track record in drug delivery systems and technologies to identify and take to market reformulated and/or repurposed drugs with a history of proven safety and efficacy using a lean and capital efficient organization where all key strategic functions are internalized, combined with an optimized network of outsourced service providers for various development activities.

Our products and product candidates are intended for patients and care givers dealing with specialty, rare and ultra-rare debilitating diseases, by offering them novel treatment options engineered with patented drug delivery systems or repurposed and optimized drugs, to help them live their best possible life and achieve their full potential.

We currently focus on three therapeutic areas for which we can best leverage our internal know how and assets: Rare Metabolic Disorders, Rare Skin Diseases and Rare Respiratory Diseases. We have a direct commercial footprint in the U.S. and in the EU, coupled with a strong network of commercial partners in the other major territories.

Our goal is to focus on clinical stage projects with a history of clinical testing and use in human patients or a strong scientific rationale. We are dedicated to developing these drugs to make a positive difference in the lives of patients suffering from severe conditions. Specifically, we intend to:

 

   

Develop ACER-001. Together with our collaboration partner Acer Therapeutics Inc. (“Acer”), we are currently pursuing approval for use of ACER-001 for the treatment of Urea Cycle Disorders (“UCDs”). We also intend to pursue the development of ACER-001 for the treatment of Maple Syrup Urine Disease (“MSUD”).

 

   

Develop RLF-100 for the treatment of certain lung conditions. We intend to focus on developing RLF-100 for the treatment of, among other indications, non-COVID-19 related ARDS, Checkpoint Inhibitor-induced Pneumonitis, and pulmonary sarcoidosis. We believe that the work of our AdVita subsidiary, will help us develop this product for multiple lung diseases.

 

   

Maximize the value of the development and commercial pipeline of APR, including the capitalizing on the recent commercial launch in the U.S. of PKU GOLIKE® as a medical food for the treatment of Phenylketonuria (“PKU”) as well as the completion of the development of the recently acquired product from Meta Healthcare for the treatment of PKU.

 

   

Seek to acquire additional products. We have in the past sought out late-stage products that fit our profile and we plan to continue to seek such products in the future.

Implications of being an Emerging Growth Company

We qualify as an “emerging growth company” as defined in the U.S. Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies. These provisions include:

 

   

the ability to present only two years of audited financial statements in addition to any required interim financial statements and correspondingly reduced disclosure in management’s discussion and analysis of financial condition and results of operations in the registration statement for the offering of which this prospectus forms a part;

 

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exemption from the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002; and

 

   

to the extent that we no longer qualify as a foreign private issuer, (1) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and (2) exemptions from the requirements of holding a non-binding advisory vote on executive compensation.

We may take advantage of these provisions for up to five years or such earlier time that we no longer qualify as an emerging growth company. We would cease to be an emerging growth company if we have more than $1.07 billion in total annual gross revenue, have more than $700 million in market value of our equity securities held by non-affiliates or issue more than $1.0 billion of non-convertible debt over a three-year period. We may choose to take advantage of some but not all of these available exemptions. For example, we have presented only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations disclosure in this prospectus, and have taken advantage of the exemption from auditor attestation on the effectiveness of our internal control over financial reporting. To the extent that we take advantage of these exemptions, the information that we provide shareholders may be different than you might obtain from other public companies in which you hold equity interests. In addition, under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies.

Implications of being a Foreign Private Issuer

We are also considered a “foreign private issuer” under U.S. securities laws. In our capacity as a foreign private issuer, we are exempt from certain rules under the U.S. Securities Exchange Act of 1934, as amended, or the Exchange Act, that impose certain disclosure obligations and procedural requirements for proxy solicitations under Section 14 of the Exchange Act. In addition, our officers, directors and principal shareholders are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act and the rules under the Exchange Act with respect to their purchases and sales of our securities. Moreover, we are not required to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act. In addition, we are not required to comply with Regulation FD, which restricts the selective disclosure of material information.

We may take advantage of these exemptions until such time as we are no longer a foreign private issuer. We will remain a foreign private issuer until such time that more than 50% of our outstanding voting securities are held by U.S. residents and any of the following three circumstances applies: (1) the majority of our executive officers or directors are U.S. citizens or residents; (2) more than 50% of our assets are located in the United States; or (3) our business is administered principally in the United States.

 

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Risk Factors Summary

Our business is subject to a number of risks of which you should be aware before making an investment decision. You should carefully consider all of the information set forth in this prospectus and, in particular, should evaluate the specific factors set forth in the section titled “Risk Factors” before deciding whether to invest in the ADSs representing our shares. These important risks include, but are not limited to, the following:

Risks related to our Business

 

   

We depend heavily on the success of our product candidates. If our clinical studies are unsuccessful, if we or our collaboration partners do not obtain regulatory approval or if we or our collaboration partners are unable to commercialize our product candidates, or if we experience significant delays in doing so, our business, financial condition and results of operations will be materially adversely affected.

 

   

Results of early clinical studies may not be predictive of future study results.

 

   

The successful commercialization of our product candidates will depend on the extent to which governmental authorities and health insurers establish adequate coverage and reimbursement levels and pricing policies.

 

   

We depend on enrollment of patients in our clinical studies for our product candidates. If we are unable to enroll in our clinical studies, our research and development efforts could be materially adversely affected.

 

   

If serious adverse, undesirable or unacceptable side effects are identified during the development of our product candidates or following approval, if any, we may need to abandon our development of such product candidates, the commercial profile of any approved label may be limited, or we may be subject to other significant negative consequences following marketing approval, if any.

 

   

We operate in highly competitive and rapidly changing industries, which may result in others discovering, developing or commercializing competing products before or more successfully than we do.

 

   

We may become exposed to costly and damaging liability claims, either when testing our product candidates or at the commercial stage or as a result of claims against our directors and officers, and our liability insurance may not cover all damages from such claims.

 

   

We have a limited history of commercializing pharmaceutical products, which may make it difficult to evaluate our future viability.

Risks related to our Relationships with Third Parties

 

   

We rely on third parties to conduct our nonclinical and clinical studies and perform other tasks for us. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or comply with regulatory requirements, we may not be able to obtain regulatory approval for or commercialize our product candidates, and our business could be substantially harmed.

 

   

We currently rely on third-party suppliers and other third parties for production of our product candidates and our dependence on these third parties may impair the advancement of our research and development programs and the development of our product candidates.

 

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Risks related to our Intellectual Property

 

   

We may not have sufficient patent terms to protect our products and business effectively.

 

   

We or our licensing or collaboration partners may become subject to intellectual property-related litigation or other proceedings to protect or enforce our patents or the patents of our licensors or licensees and collaborators, any of which could be expensive, time-consuming, and unsuccessful, and may ultimately result in our loss of ownership of intellectual property.

 

   

If we or our licensing or collaboration partners are unable to obtain and maintain effective patent rights for our technologies, product candidates or any future product candidates, or if the scope of the patent rights obtained is not sufficiently broad, our competitors could develop and commercialize products and technology similar or identical to ours, and our, or our collaboration partners’ ability to successfully commercialize our products and technology may be adversely affected.

 

   

We may be subject to claims challenging the inventorship of our patents and other intellectual property.

 

   

If we are unable to maintain effective proprietary rights for our technologies, product candidates or any future product candidates, we may not be able to compete effectively in our markets.

 

   

Third-party claims of intellectual property infringement may expose us to substantial liability or may prevent or delay our or our collaboration partners’ development and commercialization efforts.

 

   

We may be unable to protect our trade secrets, know-how and technologies.

Risks related to our Financial Condition and Results of Operations

 

   

We are a commercial-stage biopharmaceutical company with a history of operating losses.

 

   

If we fail to obtain additional funding, we may delay, reduce or eliminate our product development programs or commercialization efforts.

Risks related to the regulation of our Business

 

   

The SIX Exchange Regulation AG has launched an investigation into Relief, the results of which are uncertain.

 

   

We cannot give any assurance that any of our product candidates in development will receive regulatory approval, which is necessary before they can be commercialized.

 

   

Even if certain of our product candidates obtain regulatory approval, we will be subject to ongoing obligations and continued regulatory review, which may result in significant additional expenses. Additionally, our additional product candidates, if approved, could be subject to labeling and other restrictions and market withdrawal and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our products.

 

   

We have conducted and may in the future conduct clinical studies for our drug candidates outside the U.S., Europe and Switzerland, and the FDA, EMA and Swissmedic and applicable foreign regulatory authorities may not accept data from such studies.

 

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Risks related to this offering and our ADSs

 

   

The price of the ADSs may be volatile and may fluctuate due to factors beyond our control. An active trading market may not develop and/or may not be sustained following the offering. You may not be able to resell the ADSs at or above the public offering price. The market price of our ADSs may be volatile and may fluctuate due to factors beyond our control.

 

   

The consummation of the offering is dependent upon our receipt of listing approval from the Nasdaq Stock Market.

 

   

Future sales, or the possibility of future sales, of a substantial number of our securities could adversely affect the price of the shares and dilute shareholders.

 

   

We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.

 

   

Holders of ADSs are not treated as holders of our ordinary shares.

 

   

Claims of U.S. civil liabilities may not be enforceable against us.

Corporate Information

We were formed in 2007 under the company name i-mondo AG, which later in 2007 was changed to mondoRPHAN AG and in 2008 to mondoBIOTECH holding AG. In 2013, we changed our company name to THERAMetrics holding AG and in 2016 to RELIEF THERAPEUTICS Holding SA. We have been listed on the SIX Swiss Exchange since 2009.

Our legal seat is located in Geneva, Switzerland. Our registered office is located at Avenue de Sécheron 15, 1202 Geneva, Switzerland, and our telephone number is +41 22 545 11 16. Our website address is http://www.relieftherapeutics.com. The reference to our website is for textual reference only and information contained in, or that can be accessed through, our website or any other website cited in this registration statement is not a part thereof.

 

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THE OFFERING

 

ADSs offered by us    4,166,666 ADSs, representing 833,333,200 ordinary shares (200 Ordinary Shares per ADS)
Ordinary shares (including ordinary shares underlying the ADSs) to be outstanding immediately after this offering    5,026,173,985 ordinary shares
Warrants offered by us    Warrants to purchase an aggregate of 3,125,000 ADSs, representing 625,000,000 ordinary shares. Each Warrant will have an exercise price of $[*] per ADS (120% of the public offering price per unit), will be immediately exercisable and will expire on the fifth anniversary of the original issue date. This prospectus also relates to the offering of the Warrant Shares issuable upon the exercise of the Warrants.
Option to purchase additional ADSs    In addition, we have granted the underwriters an option, exercisable within 30 days from the date of this prospectus, to purchase up to an aggregate of an additional 125,000,000 ordinary shares in the form of ADSs (625,000 ADSs) and/or additional warrants to purchase up to 93,750,000 additional shares in the form of ADSs (468,750 ADSs).
ADSs    Each ADS represents the right to receive ordinary shares. You will have the rights of an ADS holder as provided in the deposit agreement among us, the depositary and all holders and beneficial owners of ADSs issued thereunder. To better understand the terms of the ADSs, you should carefully read the section in this prospectus entitled “Description of American Depositary Shares.” We also encourage you to read the deposit agreement, which is filed as an exhibit to the registration statement to which this prospectus forms a part.
Depositary    JPMorgan Chase Bank, N.A.
Use of Proceeds   

We estimate that we will receive net proceeds from the offering of approximately $22.1 million (CHF 21.1 million), assuming an offering price of $6.00 (CHF 5.53) per Unit, which is the midpoint of the price range set forth on the cover of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriter exercises its over-allotment option to purchase additional securities in full, we estimate that we will receive net proceeds from the offering of approximately $25.5 million (CHF $23.7 million), after deducting estimated underwriting discounts and commissions.

 

We currently intend to use the net proceeds from this offering for working capital and other general corporate purposes.

 

See the section entitled “Use of Proceeds” for a more complete description of the intended use of proceeds from this offering.

Dividend policy    We have never paid or declared dividends on our ordinary shares, and we do not anticipate paying any cash dividends on our ordinary shares in the foreseeable future.

 

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   See the section titled “Dividend Policy” for more information.
Risk Factors    See the section titled “Risk Factors” and other information included in this prospectus for a discussion of factors that you should consider carefully before deciding to invest in the ADSs and Warrants.
Conflicts of Interest    Because Raghuram (Ram) Selvaraju, Ph.D., MBA, our Chairman, is an associated person of H.C. Wainwright & Co., LLC (“Wainwright”), the representative of the underwriter in this offering, Wainwright is deemed to have a “conflict of interest” under Rule 5121 as promulgated by the Financial Industry Regulatory Authority, Inc. (“FINRA”). Accordingly, Brookline Capital Markets, a division of Arcadia Securities, LLC (“Brookline”), has agreed to act as a “qualified independent underwriter” within the meaning of FINRA Rule 5121 in connection with the offering. In its role as a qualified independent underwriter, Brookline has participated in the preparation of this registration statement and the prospectus and has exercised the usual standards of due diligence with respect thereto. For a more complete discussion of the role and compensation of the underwriter, please see the section of this prospectus entitled “Underwriting (Conflicts of Interest).”
Listing    We have applied to have the ADSs listed on the Nasdaq Global Market under the symbol “RLFT”. Our ADSs currently trade on the over-the-counter market under the symbol “RLFTD” and our ordinary shares currently trade on the over-the-counter market under the symbol “RLFTF”. There is no assurance that, if our listing is successful, an active trading market for our ADSs will develop or be sustained. There is no established public trading market for the Warrants, and we do not expect such a market to develop. We do not intend to apply for the listing of the Warrants on any national securities exchange. Without an active trading market, the liquidity of the Warrants will be limited. Additionally, if we are unable to receive approval to list our ADSs on the Nasdaq Global Market, this offering will be cancelled.
Swiss listing    Our ordinary shares are listed on the SIX Swiss Exchange under the symbol “RLF”.

The number of ordinary shares to be outstanding under this offering is based on a total of 4,192,840,785 ordinary shares outstanding as of June 30, 2022, excluding:

 

   

223,493,832 shares held in treasury; and

 

   

stock options to purchase an aggregate of 72,813,197 ordinary shares at a weighted average exercise price of CHF 0.062 per share.

Except as otherwise noted, the information in this prospectus (i) assumes no exercise by the underwriter of their option to purchase additional Units, and (ii) no exercise of the Warrants.

 

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SUMMARY FINANCIAL DATA

Relief Financial Information

We derived the selected consolidated financial data as of and for the years ended December 31, 2021 and 2020 from our audited consolidated financial statements included elsewhere in this registration statement. We have derived the selected consolidated financial data as of and for the six months ended June 30, 2022 and 2021 from our unaudited condensed consolidated financial statements included elsewhere in this registration statement. The unaudited condensed consolidated financial statements have been prepared on the same recognition and measurement basis as the audited financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to state fairly our balance sheet data at June 30, 2022 and our results of operations for the six months ended June 30, 2022 and 2021. We present our consolidated financial statements in accordance with International Financial Reporting Standards (“IFRS”), as promulgated by the International Accounting Standards Board (“IASB”). All amounts below are in Swiss Francs (CHF) and are in thousands.

The summary consolidated financial data below should be read together with those consolidated financial statements. Our historical results for any prior period are not necessarily indicative of results to be expected in any future period, and our interim period results are not necessarily indicative of results to be expected for a full year or any other interim period.

 

     December 31,      June 30,  

Statement of Operations Data

   2021      2020      2022      2021  

Revenue

     3,321        —          3,242        —    

Other gains

     1,171        273        1,303        891  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Income

     4,492        273        4,545        891  

Raw materials and consumables expense

     (750      —          (669      —    

External selling and distribution expense

     (365      —          (465      —    

External research and development expense

     (19,024      (13,672      (10,637      (8,307

Personnel expense

     (9,121      (2,627      (5,767      (3,439

Other administrative expense

     (6,750      (2,999      (3,963      (3,204

Other losses

     (752      (1,260      —          (458
  

 

 

    

 

 

    

 

 

    

 

 

 

EBITDA

     (32,270      (20,285      (16,956      (14,517

Reversal of impairment losses on intangible assets

     —          11,200        —          —    

Impairment Expense

     —          —          (8,226      —    

Amortization and depreciation expense

     (2,036      —          (2,033      —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating loss

     (34,306      (9,085      (27,215      (14,517

Gain from disposal of a subsidiary

     —          3,382        —          —    

Financial income

     97        7        162        127  

Financial expense

     (1,316      (565      (1,056      (277
  

 

 

    

 

 

    

 

 

    

 

 

 

Result before income taxes

     (35,525      (6,261      (28,109      (14,667

Income taxes

     820        (1,567      1,609        (11
  

 

 

    

 

 

    

 

 

    

 

 

 

Results for the period

     (34,705      (7,828      (26,500      (14,678
  

 

 

    

 

 

    

 

 

    

 

 

 

 

Balance Sheet Data

   December 31, 2021      June 30, 2022  

Current Assets

     54,970        34,984  

Total Assets

     251,618        230,054  

Equity

     181,530        168,598  

Non-Current Liabilities

     50,355        48,974  

Current Liabilities

     19,733        12,482  

Total Equity and Liabilities

     251,618        230,054  

 

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The following table, which has been derived from APR’s audited financial statements for the year ended December 31, 2020 summarizes the result of APR’s operations for the period indicated, in TCHF.

 

In TCHF    Fiscal Year Ended
December 31, 2020
 

Statement of Operations Data:

  

Revenue

     10,100  

Other gains

     3,943  

Total Income

     14,043  

Goods and service expense

     (6,069

Personnel expense

     (4,809

Net impairment losses on financial and contract assets

     (657

General and administrative expense

     (1,019

Operating Result

     1,489  

Depreciation and amortization expense

     (1,053

Profit before interest and taxes

     436  

Financial income and expense, net

     (327

Profit before income taxes

     109  

Income taxes

     (315

Loss for the year

     (206

Summary Unaudited Pro Forma Financial Information of Relief and APR

The unaudited pro forma condensed combined balance sheet data assume that the acquisition of APR was consummated on January 1, 2021 instead of its actual date (June 28, 2021) and combines the historical results of Relief and APR for the six months ended June 30, 2021 (as to APR) and the year ended December 31, 2021 (as to Relief). The historical financial statements of Relief and APR, which are provided elsewhere in this registration statement on Form F-1, have been adjusted to give pro forma effect to events that are (i) directly attributable to the acquisition, (ii) factually supportable, and (iii) with respect to the statements of operations, expected to have a continuing impact on the combined results. All amounts below are in Swiss Francs (CHF) and are in thousands.

 

Statement of Operations Data    December 31, 2021  

Revenue

     6,911  

Other gains

     1,183  
  

 

 

 

Total income

     8,094  

Raw materials and consumables expense

     (1,501

External selling and distribution expense

     (559

External research and development expense

     (19,765

Personnel expense

     (12,053

Other administrative expense

     (7,064

Other losses

     (752

Net impairment reversal gain on financial and contract assets

     (117
  

 

 

 

EBITDA

     (33,483

Amortization and depreciation expense

     (4,079
  

 

 

 

Operating result

     (37,562

Financial income

     166  

Financial expense

     (1,411
  

 

 

 

Net result before taxes

     (38,807

Income taxes

     1,126  
  

 

 

 

Net result for the period

     (37,681
  

 

 

 

 

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RISK FACTORS

Investing in the ADSs involves a high degree of risk. You should carefully consider the risks and uncertainties described below and the other information in this prospectus before making an investment decision. Our business, financial condition or results of operations could be adversely affected if any of these risks occurs, and as a result, the market price of the ADSs could decline and you could lose all or part of your investment. This prospectus also contains forward-looking statements that involve risks and uncertainties. See “Special Note Regarding Forward-Looking Statements.” Our actual results could differ materially and adversely from those anticipated in these forward-looking statements as a result of certain factors.

Risks Related to our Business

We depend heavily on the success of our product candidates. If our clinical studies are unsuccessful, if we or our collaboration partners do not obtain regulatory approval or if we or our collaboration partners are unable to commercialize our product candidates, or if we experience significant delays in doing so, our business, financial condition and results of operations will be materially adversely affected.

We currently have a small number of products approved for sale, all of which were acquired in the business combination with APR, generating a limited volume of sales. We recently licensed ACER-001, and have added additional products to our portfolio through our acquisitions of AdVita and APR. Our ability to generate significantly higher product revenues will depend heavily on successful clinical development, obtaining regulatory approval and eventual commercialization of these product candidates. The success of our current and future product candidates will depend on several factors, including the following:

 

   

completing preclinical studies and clinical studies that demonstrate the efficacy, safety and clinical utility of our product candidates;

 

   

receiving marketing approvals from applicable regulatory authorities;

 

   

developing product formulations with sufficiently long-term stability and chemistry, manufacturing and controls that meet governmental regulatory standards;

 

   

establishing commercial manufacturing capabilities;

 

   

launching commercial sales, marketing and distribution operations;

 

   

acceptance of our product candidates by patients, the medical community and third-party payors;

 

   

a continued acceptable safety profile following approval;

 

   

competing effectively with other therapies; and

 

   

obtaining, maintaining, enforcing and defending our intellectual property rights and claims and not infringing on third parties’ intellectual property rights.

If we or our collaborators do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize our current or future product candidates, which would materially adversely affect our business, financial conditions and results of operations.

 

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Our business is subject to significant regulation from governments and regulatory bodies, including marketing approval requirements, which could lengthen the development time, increase the cost of developing our drug product candidates or delay, prevent or limit the commercialization of our product candidates.

When a medicinal product candidate receives regulatory approval, the approval can nonetheless be subject to limitations, e.g., with regard to the indications for which it may be marketed. The approval may also be given subject to conditions, such as additional proof of the medicinal product’s effectiveness and safety. Even after approval is granted, manufacturing, safety, efficacy, recordkeeping, labeling, marketing, sales and distribution of its product candidates are regulated by government agencies in countries where we intend to market our products. All these activities are subject to recurring scrutiny and regular inspections by the relevant agencies. As a consequence, if previously unknown problems are discovered in connection with an approved product, its manufacturer or the manufacturing facilities, this can result in restrictions on the product, the manufacturer or the manufacturing facilities, up to the requirement to withdraw the product from the market. In any event, changes in existing regulations or adoption of new regulations could prevent the Company and/or its commercialization partners from obtaining or maintaining, or affect the timing of, future regulatory approvals.

These and other factors, alone or together, may have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects as well as the Share price.

Results of early clinical studies may not be predictive of future study results.

Positive or timely results from preclinical or early-stage clinical studies do not ensure positive or timely results in late-stage clinical studies or product approval by the FDA, the EMA, or comparable foreign regulatory authorities. Products that show positive preclinical or early clinical results may not show sufficient safety or efficacy in later-stage clinical studies and therefore may fail to obtain regulatory approvals. In addition, preclinical and clinical data are often susceptible to varying interpretations and analyses. Many companies that believed their product candidates performed satisfactorily in preclinical and clinical studies have nonetheless failed to obtain marketing approval for the product candidates. The FDA, the EMA and comparable foreign regulatory authorities have substantial discretion in the approval process and in determining when or whether regulatory approval will be obtained for any of our product candidates. Even if we believe that the data collected from clinical studies of our product candidates are promising, such data may not be sufficient to support approval by the FDA, the EMA or any other regulatory authority.

In some instances, there can be significant variability in safety and/or efficacy results between different studies of the same product candidate due to numerous factors, including changes in study procedures set forth in protocols, differences in the size and type of the patient populations, adherence to the dosing regimen and other study protocols, and the rate of dropout among clinical study participants. In the case of our later-stage clinical product candidates, results may differ in general on the basis of the larger number of clinical study sites and the additional countries and languages involved in these clinical studies.

Clinical studies may include subject-reported outcomes, some of which may be captured with electronic diaries. We have no assurance and cannot rely on past experience that the high frequency of questioning is not influencing the measured outcome. In addition, low compliance with daily reporting requirements may impact the studies’ validity or statistical power. We cannot assure that any Phase 1, phase 2, phase 3 or other clinical studies that either we or our collaboration partners may conduct will demonstrate consistent or adequate efficacy and safety to obtain regulatory approval to market our product candidates.

 

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If we or our collaboration partners are required to conduct additional clinical studies or other testing of any of our current or future product candidates that we or our collaboration partners develop, beyond the studies and testing that we or our collaboration partners contemplate, if we or our collaboration partners are unable to successfully complete clinical studies of our product candidates or other testing, if the results of these studies or tests are unfavorable or are only modestly favorable, or if there are safety concerns associated with our current or future product candidates, we may:

 

   

be delayed in obtaining marketing approval for our product candidates;

 

   

not obtain marketing approval;

 

   

obtain approval for indications or patient populations that are not as broad as intended or desired;

 

   

obtain approval with labeling that includes significant use or distribution restrictions or significant safety warnings, including boxed warnings;

 

   

be subject to conditional approval or otherwise to additional post-marketing studies or other requirements; or

 

   

remove the product from market after obtaining marketing approval.

Our product development costs will also increase if we experience delays in testing or receiving marketing approvals and we may be required to obtain additional funds to complete clinical studies. We cannot assure that our clinical studies will begin as planned or be completed on schedule, if at all, or that we will not need to amend our studies after they have begun. Significant clinical study delays could also shorten any periods during which we or our collaboration partners may have the exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do, which may harm our business and results of operations. In addition, some of the factors that cause, or lead to, clinical study delays may ultimately lead to the denial of regulatory approval of our product candidates.

The successful commercialization of our product candidates will depend on the extent to which governmental authorities and health insurers establish adequate coverage and reimbursement levels and pricing policies.

The successful commercialization of our product candidates will depend, in part, on the extent to which coverage and reimbursement for our products will be available from government and health administration authorities, private health insurers and other third-party payors. To manage healthcare costs, many governments and third-party payors increasingly scrutinize the pricing of new technologies and require greater levels of evidence of favorable clinical outcomes and cost-effectiveness before extending coverage. In light of such challenges to prices and the requirement for increasing levels of evidence of the benefits and clinical outcomes of new technologies, we cannot be sure that coverage will be available for any of our current or future product candidates that we or our collaboration partners will commercialize or, if available, that the reimbursement rates will be adequate in each respective region. If we are unable to obtain adequate levels of coverage and reimbursement for our product candidates, their marketability will be negatively and materially impacted.

Third-party payors may deny coverage and reimbursement status altogether for a given drug product, or may cover the product but also establish prices at levels that are too low to enable us to realize an appropriate return on our investment in product development. Because the rules and regulations regarding coverage and reimbursement change frequently, in some cases at short notice, even when there is favorable coverage and reimbursement, future changes may occur that adversely impact the favorable status. Further, the net reimbursement for drug products may be subject to additional reductions in the future depending on policy changes enacted by the national regulatory bodies.

 

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The unavailability or inadequacy and variability of third-party coverage and reimbursement could have a material adverse effect on the market acceptance of our product candidates and the future revenues we may expect to receive from those products. In addition, we are unable to predict what additional legislation or regulation relating to the healthcare industry or third-party coverage and reimbursement may be enacted in the future, or what effect such legislation or regulation would have on our business.

Our products may not gain market acceptance, in which case we or our collaboration partners may not be able to generate product revenues, which would materially adversely affect our business, financial condition and results of operations.

Even if the FDA, the EMA or any other regulatory authority approves the marketing of any product candidates that we develop, physicians, healthcare providers, patients or the medical community may not accept or use them. Efforts to educate the medical community and third-party payors on the benefits of our product candidates may require significant resources and may not be successful. If any of our current or future product candidates does not achieve an adequate level of acceptance, we or our collaboration partners may not generate significant product or royalty revenues or any profits from operations. The degree of market acceptance of our product candidates that are approved for commercial sale will depend on a variety of factors, including:

 

   

how clinicians and potential patients perceive our novel products;

 

   

the timing of market introduction;

 

   

the number and clinical profile of competing products;

 

   

our ability to provide acceptable evidence of safety and efficacy;

 

   

the prevalence and severity of any side effects;

 

   

relative convenience and ease of administration;

 

   

cost-effectiveness;

 

   

patient diagnostics and screening infrastructure in each market;

 

   

marketing and distribution support;

 

   

availability of coverage, reimbursement and adequate payment from third party payors, both public and private; and

 

   

other potential advantages over alternative treatment methods.

If our product candidates fail to gain market acceptance, this will have a material adverse impact on our ability to generate revenues to provide a satisfactory, or any, return on our investments. Even if some products achieve market acceptance, the market may prove to not be large enough to allow us to generate significant revenues.

In addition, the potential market opportunity of our product candidates is difficult to estimate precisely. Our estimates of the potential market opportunity are predicated on several key assumptions such as industry knowledge and publications, third-party research reports and other surveys. These assumptions involve the exercise of significant judgment on the part of our management and are inherently uncertain, and the reasonableness of these assumptions could not have been assessed by an independent source in every detail. If any of the assumptions proves to be inaccurate, then the actual market for our product candidates could be smaller than our estimates of the potential market opportunity. If the actual market for our product candidates is smaller than we expect, or if any approved products fail to achieve an adequate level of acceptance by physicians, healthcare payors and patients, our product or royalty revenue may be limited, and it may be more difficult for us to achieve or maintain profitability.

 

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We depend on enrollment of patients in our clinical studies for our product candidates. If we are unable to enroll patients in our clinical studies, our research and development efforts could be materially adversely affected.

If our product candidates are associated with serious adverse, undesirable or unacceptable side effects, we may need to abandon their development or limit development to certain uses or subpopulations in which such side effects are less prevalent, less severe or more acceptable from a risk–benefit perspective. Many compounds that initially showed promise in preclinical or early-stage testing were later found to cause side effects that restricted their use and prevented further development of the compound for larger indications.

Generally, the specific target population of patients and therapeutic time windows may make it difficult for us to enroll enough patients to complete clinical studies for our products in a timely and cost-effective manner. Delays in the completion of any clinical study of our product candidates will increase our costs, slow down our product candidate development and approval process, and delay or potentially jeopardize our or our collaboration partners’ ability to commence product sales and generate revenue. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical studies may also ultimately lead to the denial of regulatory approval of our product candidates.

If serious adverse, undesirable or unacceptable side effects are identified during the development of our product candidates or following approval, if any, we may need to abandon our development of such product candidates, the commercial profile of any approved label may be limited, or we may be subject to other significant negative consequences following marketing approval, if any.

If our product candidates are associated with serious adverse, undesirable or unacceptable side effects, we may need to abandon their development or limit development to certain uses or subpopulations in which such side effects are less prevalent, less severe or more acceptable from a risk–benefit perspective. Many compounds that initially showed promise in preclinical or early-stage testing were later found to cause side effects that restricted their use and prevented further development of the compound for larger indications.

Occurrence of serious side effects could impede clinical study enrollment and receipt of marketing approval from the U.S. FDA, the EMA and comparable other national regulatory authorities. Adverse events (“AEs”) and/or serious adverse events (“SAEs”) could also adversely affect physician or patient acceptance of our product candidates.

Additionally, if one or more of our product candidates receives marketing approval, and we or others later identify undesirable side effects caused by such products, a number of potentially significant negative consequences could result, including the following:

 

   

regulatory authorities may withdraw approvals of such product and require us or our collaboration partners to take any approved products off the market;

 

   

regulatory authorities may require the addition of labeling statements, specific warnings, a contraindication or field alerts to physicians and pharmacies;

 

   

we may be required to create a medication guide outlining the risks of such side effects for distribution to patients;

 

   

we may be required to change the way the product is administered, to conduct additional studies or to change the labeling of the product;

 

   

we or our collaboration partners may be subject to limitations in how we promote the product;

 

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sales of the product may decrease significantly;

 

   

we could be sued and held liable for harm caused to patients; and

 

   

our reputation and physician or patient acceptance of our products may suffer.

Any of these events could prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved, and could significantly harm our business, results of operations and prospects.

We operate in highly competitive and rapidly changing industries, which may result in others discovering, developing or commercializing competing products before or more successfully than we do.

The biopharmaceutical and pharmaceutical industries are highly competitive and subject to significant and rapid technological change. Our success is highly dependent on our ability to discover, develop and obtain marketing approval for new and innovative products on a cost-effective basis and to market them successfully. In doing so, we face and will continue to face intense competition from a variety of businesses, including large, fully integrated pharmaceutical companies, specialty pharmaceutical companies and biopharmaceutical companies, academic institutions, government agencies and other private and public research institutions in Europe, the U.S. and other jurisdictions. Many of our potential competitors, alone or with their strategic partners, have substantially greater financial, technical and human resources than we do and significantly greater experience in the discovery and development of product candidates, obtaining FDA and other regulatory approvals of treatments, and the commercialization of those treatments. Mergers and acquisitions in the pharmaceutical and biopharmaceutical industries may result in even more resources being concentrated among a smaller number of our competitors.

The highly competitive nature of and rapid technological changes in the pharmaceutical and biopharmaceutical industries could render our product candidates or our technology obsolete or noncompetitive. The commercial opportunity for our products could be reduced or eliminated if our competitors:

 

   

develop and commercialize products that are safer, more effective, less expensive, or more convenient or easier to administer;

 

   

obtain quicker FDA or other regulatory approval for their products;

 

   

establish superior intellectual property and proprietary positions;

 

   

have access to more manufacturing capacity;

 

   

implement more effective approaches to sales, marketing and distribution; or

 

   

form more advantageous strategic alliances.

Should any of these occur, our business, financial condition and results of operations could be materially adversely affected.

Our business is subject to additional risks associated with international operations.

Our business is subject to risks associated with conducting business internationally. Accordingly, our future results could be harmed by a variety of factors, including:

 

   

potentially reduced protection for intellectual property rights;

 

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changes in a specific country’s or region’s political or economic environment;

 

   

trade protection measures, import or export licensing requirements or other restrictive actions such as government sanctions;

 

   

negative consequences from changes in tax laws;

 

   

compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;

 

   

difficulties associated with staffing and managing international operations, including differing labor relations;

 

   

production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and

 

   

business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters including earthquakes, typhoons, floods and fires.

The COVID-19 pandemic may impact our business.

In December 2019, a novel strain of coronavirus, COVID-19, surfaced in Wuhan, Hubei Province, China. By March 2020, COVID-19 had spread to other countries, including Switzerland and the United States, and was declared a pandemic by the World Health Organization on March 11, 2020. Since the beginning of the pandemic, governments, public institutions, and other organizations in countries and localities where COVID-19 cases have been identified have taken certain preventative or protective measures to combat the transmission of the virus, including implementation of travel restrictions or bans, closures of non-essential businesses, limitations of public gatherings, other social distancing and shelter-in-place measures, and delays or cancellations of elective surgeries. The COVID-19 pandemic continues to pose the risk that the Company, our employees, contractors, suppliers, and other partners may be prevented from conducting business activities for an indefinite period of time due to shutdowns that may be requested or mandated by state and federal governmental authorities.

As the COVID-19 pandemic continues, we may experience disruptions that could materially impact our business and planned clinical trials, including:

 

   

delays or difficulties in conducting preclinical and clinical trials;

 

   

interruption in global manufacturing and shipping that may affect the manufacturing and/or transport of clinical trial materials and other materials, including testing equipment; and

 

   

changes in local regulations as a response to COVID-19 that may require us to change the way we perform our trials.

Our future growth and ability to compete depends on retaining our key personnel and recruiting additional qualified personnel

Our success depends upon the continued contributions of our key management, scientific and technical personnel, many of whom have substantial experience with or been instrumental for us and our projects. The loss of our key managers and senior scientists could delay our research and development activities. Laws and regulations on executive compensation, including legislation in Switzerland, may restrict our ability to attract, motivate and retain the required level of qualified personnel. In Switzerland, legislation affecting public companies has been passed that, among other things, imposes an annual binding shareholder “say on pay” vote with respect to the compensation of the executive management, including executive officers and the members of the board of directors. In addition, the competition for qualified personnel in the pharmaceutical and biopharmaceutical field is intense, and our future success depends

 

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upon our ability to attract, retain and motivate highly skilled scientific, technical and managerial employees. We face competition for personnel from other companies, universities, public and private research institutions and other organizations. If our recruitment and retention efforts are unsuccessful in the future, it may be difficult for us to implement our business strategy, which could have a material adverse effect on our business.

We may become exposed to costly and damaging liability claims, either when testing our product candidates or at the commercial stage or as a result of claims against our directors and officers, and our liability insurance may not cover all damages from such claims.

We are exposed to potential product liability and professional indemnity risks that are inherent in the research, development, manufacturing, marketing and use of pharmaceutical or biopharmaceutical products. Currently we have no products that have been approved for commercial sale; however, our current and future use of product candidates in clinical studies, and the sale of any approved products in the future, may expose us to liability claims. These claims might be made by patients that use the product, by healthcare providers, or by pharmaceutical or biopharmaceutical companies or others selling such products. Any claims against us, regardless of their merit, could be difficult and costly to defend and could materially adversely affect the market for our product candidates or any prospects for commercialization of our product candidates.

Although the clinical trial process is designed to identify and assess potential side effects, it is always possible that a drug, even after regulatory approval, may exhibit unforeseen side effects. If any of our product candidates were to cause adverse side effects during clinical studies or after approval of the product candidate, we may be exposed to substantial liabilities. Physicians and patients may not comply with any warnings that identify known potential adverse effects and patients who should not use our product candidates.

We continuously seek to maintain appropriate and cost-effective liability insurance coverage in connection with our products and for purposes of indemnifying our directors and officers for claims against them. It is, however, possible that our liabilities could exceed our insurance coverage. For example, we intend to expand our insurance coverage to include the sale of commercial products if we obtain marketing approval for any of our product candidates. However, we may not be able to maintain insurance coverage at a reasonable cost or obtain insurance coverage that will be adequate to satisfy any liability that may arise. If a successful liability claim or series of claims is brought against us for uninsured liabilities or in excess of insured liabilities, our assets may not be sufficient to cover such claims and our business operations could be impaired.

Should any of the events described above occur, this could have a material adverse effect on our business, financial condition and results of operations.

Business disruptions could seriously harm our future revenue and financial condition and increase our costs.

Our operations and those of our third-party collaborators and other contractors and consultants, could be subject to earthquakes, power shortages, telecommunications failures, water shortages, floods, hurricanes, typhoons, fires, extreme weather conditions, medical epidemics, and other natural or man-made disasters or business interruptions, for which we are partly uninsured. In addition, we rely on our third-party research institution collaborators for conducting research and development of our product candidates, and they may be affected by government shutdowns or withdrawn funding. The occurrence of any of these business disruptions could seriously harm our operations and financial condition and increase our costs and expenses. We rely on third-party manufacturers to produce and process our product candidates. Our ability to obtain clinical supplies of our product candidates could be disrupted if the operations of these suppliers are affected by a man-made or natural disaster or by other business interruption.

 

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Our operations are conducted internationally with employees, consultants and strategic vendors located in the U.S. and in Europe, including Switzerland where the Company is headquartered. Damage or extended periods of interruption to our corporate, development or research facilities due to fire, natural disaster, power loss, communications failure, unauthorized entry or other events could cause us to cease or delay development of some or all of our product candidates. Although we maintain property damage and business interruption insurance coverage on these facilities, our insurance might not cover all losses under such circumstances and our business may be seriously harmed by such delays and interruption.

We have a limited history of commercializing pharmaceutical products, which may make it difficult to evaluate our future viability.

Our operations to date have mostly been limited to financing and staffing our company, developing our technology, and developing our product candidates. Until our acquisition of APR, we had not generated any revenue from product sales. While we began marketing commercial products with our acquisition of APR, our history of operating in the commercial market is short. Consequently, predictions about our future success or viability may not be as accurate as they could be if we had a longer history of successfully developing and commercializing pharmaceutical products. Factors that may affect our ability to commercialize our product candidates on our own include recruiting and retaining adequate numbers of effective sales and marketing personnel, obtaining access to or persuading adequate numbers of physicians to prescribe our drug candidates, and other unforeseen costs associated with creating an independent sales and marketing organization. Developing a sales and marketing organization requires significant investment, is time consuming and could delay the launch of our product candidates. Consequently, we may not be able to build an effective sales and marketing organization. Additionally, successful commercialization also requires an enhanced regulatory organization, which we currently do not have. If we are unable to build our own distribution and marketing capabilities, are unable to find suitable partners for the commercialization of our product candidates or do not successfully obtain the necessary regulatory capabilities, we may not generate sufficient revenues from them and as a result may not be able to reach or sustain profitability.

Pressure on drug product third-party payor coverage, reimbursement and pricing may impair our ability to be reimbursed at prices or on terms sufficient to provide a viable financial outcome.

The commercial success of our pharmaceutical products will depend substantially on the extent to which the cost of those products will be paid or reimbursed by government health administration authorities (such as Medicare and Medicaid in the U.S.), private health coverage providers and other third party payors. If reimbursement is not available, or is available only to limited levels, we may be unable to continue to successfully commercialize our products. Even if coverage is provided, the approved reimbursement amount may not be high enough to establish and maintain pricing sufficient to realize a meaningful return on our investment.

The healthcare industry is acutely focused on cost containment, both in the United States and elsewhere. Government authorities and third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications, which could affect our ability to sell our products profitably. These payors may not view our products as cost-effective, and coverage and reimbursement may not be available to our customers, or may not be sufficient to allow our products, if any, to be marketed on a competitive basis. Cost-control initiatives could cause us to decrease the price we might establish for products, which could result in lower than anticipated product revenues. If the prices for our products decrease or if governmental and other third-party payors do not provide adequate coverage or reimbursement, our prospects for revenue and profitability will suffer.

Risks related to our Relationships with Third Parties

We were in litigation with NeuroRx.

On October 7, 2021, we filed a lawsuit against NeuroRx and its now former Chief Executive Officer, Dr. Jonathan Javitt, for multiple breaches of the Collaboration Agreement. The complaint was filed in the Supreme Court in the State of New York in Manhattan.

The complaint alleged that defendants are in breach of numerous provisions of the Collaboration Agreement, including without limitation:

 

   

by failing to provide Relief with the full data set from NeuroRx’s phase 2b/3 clinical trial evaluating IV RLF-100 (aviptadil) for the treatment of acute respiratory failure due to COVID-19, and the FDA correspondence relating to their trial and the failure to obtain EUA for the product, which data and information are required to be provided to Relief by NeuroRx under the Collaboration Agreement and which data and information are required for Relief to seek approval to commercialize the product in Europe;

 

   

by failing to allow Relief, despite multiple requests, to conduct a forensic audit of NeuroRx’s books and records to determine how the funds that Relief provided to NeuroRx were actually used in order to help determine the amount, if any, that may be owed by us to NeuroRx under the Collaboration Agreement;

 

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by entering into multiple agreements relating to the development of the product subject to the collaboration without Relief’s consent, as required under the Collaboration Agreement;

 

   

by engaging in commercialization efforts in territories outside the purview of NeuroRx’s territory under the Collaboration Agreement; and

 

   

by developing additional COVID-19 treatments in violation of the exclusivity provisions of the Collaboration Agreement.

The suit also alleged, among other matters, breaches of the covenant of good faith and fair dealing and tortious interference with prospective economic advantage.

The Complaint, among other remedies, sought damages, an order compelling NeuroRx to comply with multiple provisions of the Collaboration Agreement, and a declaration directing NeuroRx to deliver the entire data set from the Phase 2b/3 clinical trial of the intravenous administration of aviptadil to Relief.

Further, on January 10, 2022, NeuroRx, filed a complaint against Relief. Among other claims, NeuroRx’s complaint made the following allegations:

 

   

NeuroRx claimed that Relief breached the Collaboration Agreement by refusing to make required payments thereunder.

 

   

NeuroRx claimed that by failing to pay what they allege is due, Relief repudiated the Collaboration Agreement and that NeuroRx was no longer bound thereby.

 

   

NeuroRx claimed that Relief defamed NeuroRx through its statements regarding NeuroRx’s breaches of the Collaboration Agreement and other matters, claiming that Relief knew that such statements were recklessly made and/or knowingly false.

In the complaint, NeuroRx claimed damages in excess of $185 million, and sought a ruling that the Collaboration Agreement is void.

On August 22, 2022, Relief and NRx issued a press release announcing that they had agreed to a tentative settlement of the pending litigation. The parties announced that they had agreed to work collaboratively to finalize the settlement within the next thirty days. Further, the parties announced that they had agreed to stay the litigation for an additional sixty days to allow for the negotiation and execution of the definitive settlement agreement and related terms. This litigation stay was later extended to November 11, 2022.

On November 14, 2022, Relief and NRx issued a press release announcing that the parties had entered into a definitive settlement agreement to resolve all matters relating to the pending litigation. At the closing of this settlement, held on December 19, 2022, (i) NRx transferred to Relief all of the assets that it previously used in its aviptadil development program, including its regulatory filings, patent applications, clinical data, and the formulation of the aviptadil product it was previously developing, (ii) Relief has the exclusive right and control going forward to develop and commercialize an aviptadil product, (iii) Relief has agreed to use commercially reasonable efforts to continue the existing Right to Try Program for aviptadil in the United States for at least 2 years, (iv) Relief will pay NRx milestone payments if it can successfully obtain commercial approval of an aviptadil product (whether for COVID-19 or any other indication), (v) Relief will pay NRx royalties based on a percentage of future sales of an aviptadil product (whether for COVID-19 or any other indication), up to a maximum of $30 million in the aggregate, (vi) NRx Pharmaceuticals has agreed not to compete in the development of an aviptadil product in the future, and (vii) Relief and NRx Pharmaceuticals have dismissed their pending litigation.

 

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If we fail to maintain our strategic relationships with any of our current or future strategic partners, our business, commercialization prospects and financial condition may be materially adversely affected.

We rely on our strategic partners. Good relationships with our strategic partners are important for our business prospects and while we have a positive working relationship with Acer, we are in litigation with NeuroRx. Further, if our relationships with our current or future strategic partners were to challenge our use of their intellectual property or our calculations of the payments we are owed under our agreements, our business, financial condition, commercialization prospects and results of operations could be materially adversely affected.

We may seek to form additional strategic alliances in the future with respect to our product candidates, and if we do not realize the benefits of such alliances, our business, financial condition, commercialization prospects and results of operations may be materially adversely affected.

We face significant competition in seeking appropriate collaborators. Collaborations are complex and time-consuming to negotiate, document and manage. Any delays in entering into new strategic partnership agreements related to our product candidates could delay the development and commercialization of our product candidates and reduce their competitiveness even if they reach the market. We may also be restricted under existing and future collaboration agreements from entering into strategic partnerships or collaboration agreements on certain terms with other potential collaborators. We may not be able to negotiate collaborations on acceptable terms, or at all, for any of our existing or future product candidates and programs because the potential partner may consider that our research and development pipeline is insufficiently developed to justify a collaborative effort, or that our product candidates and programs do not have the requisite potential to demonstrate safety and efficacy in the target population. If we are unsuccessful in establishing and maintaining a collaboration with respect to a particular product candidate, we may have to curtail the development of that product candidate, reduce the scope of or delay its development program or one or more of our other development programs, delay its potential commercialization or reduce the scope of our sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense, for which we have not budgeted. If we elect to increase our expenditures to fund development or commercialization activities on our own, we may need to obtain additional capital, which may not be available to us on acceptable terms or at all. If we do not have sufficient funds, we will not be able to bring our product candidates to market and generate product revenue. Even if we are successful in establishing a new strategic partnership or entering into a collaboration agreement, we cannot be certain that, following such a strategic transaction or license, we will be able to progress the development and commercialization of the applicable product candidates as envisaged, or that we will achieve the revenues that would justify such transaction, and we could be subject to the following risks, each of which may materially harm our business, commercialization prospects and financial condition:

 

   

we may not be able to control the amount and timing of resources that the collaboration partner devotes to the product development program;

 

   

the collaboration partner may experience financial difficulties;

 

   

we may be required to grant or otherwise relinquish important rights such as marketing, distribution and intellectual property rights; or

 

   

business combinations or significant changes in a collaboration partner’s business strategy may adversely affect our willingness to continue any arrangement.

 

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We rely on third parties to conduct our nonclinical and clinical studies and perform other tasks for us. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or comply with regulatory requirements, we may not be able to obtain regulatory approval for or commercialize our product candidates, and our business could be substantially harmed.

We have relied upon and plan to continue to rely upon third-party clinical research organizations or contract research organizations (“CROs”), to monitor and manage data for our ongoing nonclinical and clinical programs, including the clinical studies of our product candidates. We rely on these parties for execution of our nonclinical and clinical studies and control only certain aspects of their activities. Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol, legal, regulatory, and scientific standards and our reliance on the clinical CROs does not relieve us of our regulatory responsibilities. We and our clinical CROs and other vendors are required to comply with current Good Manufacturing Practice (“cGMP”), current Good Clinical Practice (“cGCP”), and current Good Laboratory Practice (“cGLP”), which are regulations and guidelines enforced by the FDA, the Competent Authorities of the Member States of the EU and comparable foreign regulatory authorities for our product candidates in nonclinical and clinical development (where applicable). Regulatory authorities enforce these regulations through periodic inspections of study sponsors, principal investigators, study sites and other contractors. If we or any of our clinical CROs or vendors fail to comply with applicable regulations, the data generated in our nonclinical and clinical studies may be deemed unreliable and the EMA, FDA, other regulatory authorities may require us to perform additional nonclinical and clinical studies before approving our marketing applications. We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that all of our clinical studies comply with cGCP regulations. In addition, our clinical studies must be conducted with products produced under cGMP regulations. Our failure to comply with these regulations may require us to repeat clinical studies, which would delay the regulatory approval process.

If any of our relationships with these third-party clinical CROs terminates, we may not be able to enter into arrangements with alternative clinical CROs or do so on commercially reasonable terms. In addition, our clinical CROs are not our employees, and except for remedies available to us under our agreements with such clinical CROs, we cannot control whether or not they devote sufficient time and resources to our ongoing nonclinical and clinical programs. If clinical CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the data they obtain is compromised due to their failure to adhere to our protocols, regulatory requirements, or for other reasons, our clinical studies may be extended, delayed, or terminated and we may not be able to obtain regulatory approval for or successfully commercialize our product candidates. Clinical CROs may also generate higher costs than anticipated. As a result, our results of operations and the commercial prospects for our product candidates would be harmed, our costs could increase, and our ability to generate revenue could be delayed.

Switching or adding additional clinical CROs involves additional cost and requires management time and focus. In addition, there is a natural transition period when a new clinical CROs commences work. As a result, delays occur, which could materially impact our ability to meet our desired clinical development timelines. Though we carefully manage our relationships with our clinical CROs, there can be no assurance that we will not encounter similar challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, financial condition and prospects.

We currently rely on third-party suppliers and other third parties for production of our product candidates and our dependence on these third parties may impair the advancement of our research and development programs and the development of our product candidates.

We currently rely on and expect to continue to rely, on third parties for the manufacturing and supply of chemical and biological compounds and formulations for the clinical studies of our current and future product candidates. For the foreseeable future, we expect to continue to rely on such third parties for the manufacture of any of our product candidates on a clinical or commercial scale, if any of our product

 

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candidates receives regulatory approval. Reliance on third-party providers may expose us to different risks than if we were to manufacture product candidates ourselves. The facilities used by our contract manufacturers to manufacture our product candidates must be approved by the FDA or other regulatory authorities, pursuant to inspections that will be conducted after we submit our New Drug Application (“NDA”) or comparable marketing application to the FDA or other regulatory authority. We do not have control over a supplier’s or manufacturer’s compliance with these laws, regulations and applicable cGMP standards and other laws and regulations, such as those related to environmental health and safety matters. If our contract manufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA or others, they will not be able to secure and/or maintain regulatory approval for their manufacturing facilities. In addition, we have no control over the ability of our contract manufacturers to maintain adequate quality control (“QC”), quality assurance (“QA”) and qualified personnel. If we are compelled or we wish to find alternative manufacturing facilities, this could significantly impact our ability to develop, obtain regulatory approval for or market our product candidates. Any failure to achieve and maintain compliance with these laws, regulations and standards could subject us to the risk that we may have to suspend the manufacturing of our product candidates or that obtained approvals could be revoked, which would adversely affect our business and reputation.

Third-party providers may breach agreements they have with us because of factors beyond our control. Contract manufacturers often encounter difficulties involving production yields, QC and QA, as well as shortages of qualified personnel. They may also terminate or refuse to renew their agreements because of their own financial difficulties or business priorities, potentially at a time that is costly or otherwise inconvenient for us. If we are unable to find adequate replacement or another acceptable solution in time, our clinical studies could be delayed, or our commercial activities could be harmed.

In addition, the fact that we are dependent on our suppliers and other third parties for the manufacture, storage and distribution of our product candidates means that we are subject to the risk that our product candidates and, if approved, commercial products may have manufacturing defects that we have limited ability to prevent or control. The sale of products containing such defects could result in recalls or regulatory enforcement action that could adversely affect our business, financial condition and results of operations.

Growth in the costs and expenses of components or raw materials may also adversely influence our business, financial condition and results of operations. Supply sources could be interrupted from time to time and, if interrupted, we cannot be certain that supplies could be resumed (whether in part or in whole) within a reasonable timeframe and at an acceptable cost or at all. Our current and anticipated future dependence upon others for the manufacturing of our current and future product candidates may adversely affect our future profit margins and our, or our collaboration partners’, ability to commercialize any products that receive marketing approval on a timely and competitive basis.

Risks related to Intellectual Property

We may not have sufficient patent terms to protect our products and business effectively.

Patents have a limited lifespan. In the U.S. and Europe, the natural expiration of a patent is generally 20 years after it is filed. Although various extensions or adjustments may be available, such as adjustments based on certain delays caused by the U.S. Patent and Trademark Office (the “USPTO”) or the European Patent Office (“EPO”) to the life of a patent, and the protection it affords, is limited. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our owned, co-owned and licensed patent portfolios may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours or otherwise provide us with a competitive advantage. Even if patents covering our product candidates are obtained and unchallenged, once the patent life has expired for a product, we may be open to competition from generic medications.

 

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Although patent term extensions under the Hatch-Waxman Act in the U.S. and under supplementary protection certificates (“SPCs”) in Europe may be available to extend the patent exclusivity term for our products, we cannot provide any assurances that any such patent term extension will be obtained and, if so, for how long. The Hatch-Waxman Act permits a patent extension term of up to five years as compensation for patent term lost during the FDA regulatory review process. A patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, only one patent may be extended, and only those claims covering the approved drug, a method for using it or a method for manufacturing it may be extended. However, we may not be granted any extension because of, for example, failing to exercise due diligence during the testing phase or regulatory review process, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents or otherwise failing to satisfy applicable requirements. It is not possible to base an SPC in Europe on a patent in a European Member State if that patent expires before the market approval of the clinical product, protected by the patent, is obtained. As the “product” (active ingredient(s)) must be “protected by a basic patent in force”, only a granted patent that is in force, and remains in force until it reaches the end of its full term, can serve as a “basic patent” upon which an SPC can be based. Therefore, expired patents and pending patent applications cannot serve as the basis for an SPC. Given the relatively long clinical development timelines of biologicals and new chemical entities for therapeutic purpose, we may not be granted any patent extensions as we might fail to apply for the extensions prior to expiration of relevant patents. Moreover, the applicable time period or the scope of patent protection afforded could be less than we request. If we are unable to obtain patent term extension or if the term of any such extension is less than we request, such result could have a material adverse effect on our business.

We or our licensing or collaboration partners may become subject to intellectual property-related litigation or other proceedings to protect or enforce our patents or the patents of our licensors or licensees and collaborators, any of which could be expensive, time-consuming, and unsuccessful, and may ultimately result in our loss of ownership of intellectual property.

Competitors may infringe our patents or the patents of our licensors or collaborators. To counter such infringement, we may be required to file infringement claims against those competitors, which can be expensive and time-consuming. If we or one of our licensing or collaboration partners were to initiate legal proceedings against a third party to enforce a patent covering one of our product candidates, the defendant could counterclaim that the patent covering our product candidate is invalid or unenforceable or that the defendant’s products do not infringe our or our licensing collaborators’ patents or that we or our licensing collaborators infringe the defendant’s patents. In patent litigation in the U.S., defendant counterclaims alleging invalidity, unenforceability and non-infringement are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, obviousness-type double patenting, lack of written description, or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO or the EPO, or made a misleading statement, during prosecution. In addition, third parties may raise similar claims before administrative bodies in the U.S., in Europe or elsewhere, even outside the context of litigation. Such mechanisms include re-examination, post-grant review, inter partes review, interference and derivation proceedings as well as equivalent proceedings in foreign jurisdictions, such as opposition proceedings in Europe. The outcome following legal assertions of invalidity and unenforceability is unpredictable. Such proceedings or patent litigations could result in the revocation or cancellation of or amendment to our patents in such a way that they no longer cover our product candidates or otherwise provide any competitive advantage. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which the patent examiner and we or our licensing or collaboration partners were unaware during prosecution. A court may also refuse to stop a third party from using the technology in question on the grounds that our patents do not cover that technology. An adverse result in any proceeding could put one or more of our patents at risk of being invalidated or interpreted narrowly, which could have a material adverse effect on our business and financial condition.

 

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Interference proceedings provoked by third parties or brought by us or declared by the USPTO or the EPO may be necessary to determine the priority of inventions with respect to our patents or patent applications or those of our licensors, licensees or collaborators. An unfavorable outcome could require us or our licensing or collaboration partners to cease using the related technology or to attempt to license rights to it from the prevailing party. Our business could be materially harmed if the prevailing party does not offer us or our licensing or collaboration partners a license on commercially reasonable terms or at all. If we or our licensing or collaboration partners are unsuccessful in any interference proceedings, we may lose our ownership of intellectual property or our patents may be narrowed or invalidated. There can be no assurance as to the outcome of the interference and opposition proceedings, and any of the foregoing could result in a material adverse effect on our business, financial condition, results of operations or prospects.

Our defense of litigation, interference proceedings or other intellectual property-related proceedings may fail and, even if successful, may result in substantial costs and distract our management and other employees from their normal responsibilities. Such litigation or proceedings could substantially increase our operating losses and could substantially reduce the funds necessary to continue our clinical studies and research programs or force us to license necessary technology from third parties or enter into development partnerships that would help us bring our product candidates to market. We may not be able to prevent, alone or with our licensing or collaboration partners, misappropriation of our intellectual property rights, particularly in countries where the laws may not protect those rights as fully as in the U.S.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions, decisions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our Shares.

If we or our licensing or collaboration partners are unable to obtain and maintain effective patent rights for our technologies, product candidates or any future product candidates, or if the scope of the patent rights obtained is not sufficiently broad, our competitors could develop and commercialize products and technology similar or identical to ours, and our, or our collaboration partners’ ability to successfully commercialize our products and technology may be adversely affected.

We rely upon a combination of patents, trade secret protection and confidentiality agreements to protect the intellectual property related to our technologies and product candidates. Our success depends in large part on our and our licensing or collaboration partners’ ability to obtain and maintain patent and other intellectual property protection in the U.S., the EU and other countries with respect to our proprietary technologies and product candidates. If such license is not granted or terminated, our licensing or collaboration partners may be required to cease development and commercialization of our product candidates, any of which could have a material adverse effect on our business, financial condition, results of operations or prospects.

We have sought to protect our proprietary position by filing patent applications in the U.S. and other countries related to any of our novel technologies and products that are important to our business. This process is expensive, time-consuming, and complex, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost, in a timely manner or in all jurisdictions. It is also possible that we will fail to identify patentable aspects of our or our licensing or collaboration partners’ research and development output before it is too late to obtain patent protection. Moreover, in some circumstances, we do not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the patents, covering technology that we license to or from third parties. Therefore, these patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business.

 

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The patent position of pharmaceutical and biopharmaceutical companies generally is highly uncertain and involves complex legal and factual questions for which legal principles remain unsolved. As a result, the inventorship, issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. The pending or future patent applications that we own, co-own or in-license may fail to issue, fail to result in issued patents with claims that cover our product candidates in the U.S. or in other countries, or fail to effectively prevent others from commercializing competitive technologies and product candidates. Changes in either the patent laws or interpretation of the patent laws in the U.S. and other countries may diminish the value of our patents or narrow the scope of our patent protection.

We may not be aware of all third-party intellectual property rights potentially relating to our technologies or product candidates. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the U.S. and other jurisdictions remain confidential for a period of time after filing, and some remain so until issued. Therefore, we cannot be certain that we were the first to file any patent application related to our product candidates or technologies, or whether we were the first to make the inventions claimed in our owned or co-owned patents or pending patent applications, nor can we know whether those from whom we license patents were the first to make the inventions claimed or were the first to file.

There is no assurance that all potentially relevant prior art relating to our patents and patent applications has been found, which can invalidate a patent or prevent a patent from issuing from a pending patent application. Even if patents do successfully issue, and even if such patents cover our product candidates, third parties may challenge their validity, enforceability, or scope, which may result in such patents being narrowed, found unenforceable or invalidated, which could allow third parties to commercialize our technology or products and compete directly with us, without payment to us, or result in our or our collaboration partners’ inability to manufacture or commercialize products without infringing third-party patent rights. Furthermore, even if they are unchallenged, our patents and patent applications may not adequately protect our intellectual property, provide exclusivity for our product candidates, prevent others from designing around our claims or provide us with a competitive advantage. Any of these outcomes could impair our ability to prevent competition from third parties, which may have a material adverse effect on our business.

We may be subject to claims challenging the inventorship of our patents and other intellectual property.

We may be subject to claims that former employees, collaborators or other third parties have an interest or title in our patents or other intellectual property as an inventor or co-inventor. For example, we may have inventorship disputes arise from conflicting obligations of consultants, CROs, contract manufacturing organizations (“CMOs”), academic institutions or others who are involved in developing our product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship or our ownership of our patents or other intellectual property. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or the right to use, valuable intellectual property. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

 

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Patent policy and rule changes could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, thereby impairing our ability to protect our technologies and products.

Changes in either the patent laws or interpretation of the patent laws in the U.S., EU or elsewhere could increase the uncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of issued patents. Assuming the other requirements for patentability are met, in the U.S. prior to March 15, 2013, the first to make the claimed invention is entitled to the patent, whereas outside the U.S., the first to file a patent application was entitled to the patent. After March 15, 2013, under the Leahy-Smith America Invents Act (the “Leahy-Smith Act”), which was enacted on September 16, 2011, the U.S. moved to a first-to-file system. Under a first-to-file system, assuming the other requirements for patentability are met, the first inventor to file a patent application generally will be entitled to the patent on an invention regardless of whether a third party was the first to invent the invention. The Leahy-Smith Act also includes a number of significant changes that affect the way patent applications are prosecuted and may also affect patent litigation. These include allowing third-party submission of prior art to the USPTO during patent prosecution and additional procedures to attack the validity of a patent by the USPTO administered during post grant proceedings, including re-examination proceedings, inter partes review, post-grant review and derivation proceedings. Therefore, the Leahy-Smith Act and its implementation increases the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business, financial condition, results of operations and prospects. In addition, future actions by the U.S. Congress, the federal courts and the USPTO could cause the laws and regulations governing patents to change in unpredictable ways. Any of the foregoing could harm our business, financial condition and results of operations.

In addition, the patent positions of companies in the development and commercialization of biologics and pharmaceuticals are particularly uncertain. U.S. Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. This combination of events has created uncertainty with respect to the validity and enforceability of patents, once obtained. Depending on future actions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that could have a material adverse effect on our existing patent portfolio and our ability to protect and enforce our intellectual property in the future in the U.S.

If we are unable to maintain effective proprietary rights for our technologies, product candidates or any future product candidates, we may not be able to compete effectively in our markets.

In addition to the protection afforded by patents, we rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable or that we elect not to patent, processes for which patents are difficult to enforce, and any other elements of our product candidate discovery and development processes that involve proprietary know-how, information or technology that is not covered by patents. However, trade secrets can be difficult to protect and some courts inside and outside the U.S. are less willing or unwilling to protect trade secrets. For instance, the EU has introduced a new Directive on trade secrets increasing the standards for protection. Because we rely on our advisors, employees and third-party contractors and consultants to research and develop and to manufacture our product candidates, we must, at times, share our intellectual property with them. We seek to protect our intellectual property and other proprietary technology in part by entering into confidentiality agreements and master service agreements, if applicable, material transfer agreements, consulting agreements or other similar agreements with our advisors, employees, contractors, consultants, licensing and collaboration partners, and other third parties with confidentiality provisions. These agreements typically limit the rights of these third parties to use or disclose our confidential information, including our intellectual property and trade secrets. These agreements also typically restrict the ability of third parties to publish data potentially relating to our intellectual property, although our agreements may contain certain limited publication rights. For example, any academic institution that we may collaborate with in the future may expect to be granted rights to publish data arising out of such collaboration, provided that we may have the right to be notified in advance and given the opportunity to delay publication for a limited time period in order for us to secure patent

 

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protection of intellectual property rights arising from the collaboration, in addition to the opportunity to remove confidential or trade secret information from any such publication. We also conduct joint research and development programs that may require us to share intellectual property under the terms of our research and development or similar agreements. However, we cannot guarantee that we have entered into such agreements with each party that may have or have had access to our trade secrets or other confidential information or proprietary technology and processes, or that such agreements will not be breached or that our trade secrets or other confidential information will not otherwise be disclosed. Despite the contractual provisions employed when working with these advisors, employees and third-party contractors and consultants, the need to share intellectual property and other confidential information increases the risk that such confidential information becomes known by our competitors, is inadvertently incorporated into the product development of others or is disclosed or used in violation of these agreements. Additionally, our grant agreements typically provide for dissemination of results to academic institutions and to the general public. As a result, our information may be disseminated with the loss of protection status.

We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining the physical security of our premises and the physical and electronic security of our information technology systems. Despite our efforts to protect our intellectual property, our competitors may discover our trade secrets through breach of our agreements by third parties, for which we may not have adequate remedies for any breach, or publication of information by any of our CROs, academic partners, funding organizations or our licensing or collaboration partners. Additionally, if the steps taken to maintain our trade secrets are deemed inadequate by law, we may have insufficient recourse against third parties for misappropriating such trade secrets. Misappropriation or unauthorized disclosure of our trade secrets could impair our competitive position and may have a material adverse effect on our business. Moreover, if any of our trade secrets were to be lawfully obtained or independently developed by a competitor or other third party, we would have no right to prevent such competitor or other third party from using that technology or information to compete with us. A competitor’s or other third party’s discovery of our intellectual property would impair our competitive position and have a material adverse effect on our business.

Further, the laws of different countries protect proprietary rights to a different extent or in a different manner. As a result, we may encounter significant problems in protecting and defending our intellectual property in different countries both in the U.S. and abroad. If we are unable to prevent material disclosure of the intellectual property related to our technologies to third parties, we will not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business, financial condition and results of operations.

Despite confidentiality clauses within our employment agreements, we cannot ensure that departing employees will not breach any post-termination commitments in such agreements by allowing others to access our trade secrets.

Obtaining and maintaining our patent protection depends on compliance with various procedural, document-submission, fee-payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance with these requirements.

Periodic maintenance fees, renewal fees, annuity fees and various other government fees on a patent and patent application are due to be paid to the USPTO and other national patent agencies in several stages over the lifetime of the patent and patent application. The USPTO, the EPO and various other governmental patent agencies require compliance with a number of procedural, documentary, fee-payment and other similar provisions during the patent application process. We employ reputable law firms and other professionals to help us comply with these requirements and we are also dependent on our licensors or collaboration partners to take the necessary action to comply with these requirements with respect to certain of our intellectual property. Although an inadvertent lapse can in many cases be cured by payment of a late

 

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fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, nonpayment of fees and failure to properly legalize and submit formal documents. In such an event, our competitors might be able to enter the market, which would have a material adverse effect on our business.

The patent protection and patent prosecution for some of our product candidates could be dependent on third parties.

Although we normally seek to obtain the right to control prosecution, maintenance and enforcement of the patents relating to our product candidates, there may be times when the filing and prosecution activities for patents relating to our product candidates are controlled by our licensors or collaboration partners. If any of our current or future licensing or collaboration partners fail to prosecute, maintain and enforce such patents and patent applications in a manner consistent with the best interests of our business, including by payment of all applicable fees for patents covering our product candidates, we could lose our rights to the intellectual property or our exclusivity with respect to those rights, our or our collaboration partners’ ability to develop and commercialize those product candidates may be adversely affected and we may not be able to prevent competitors from making, using, and selling competing products. In addition, even where we have the right to control patent prosecution of patents and patent applications we have licensed to and from third parties, we may still be adversely affected or prejudiced by actions or inactions of our licensees, our licensors and their counsel that took place prior to the date upon which we assumed control over patent prosecution.

Additionally, we may be adversely affected or prejudiced by actions or inactions of our external and internal patent counsels working solely on our projects or our joint patent counsels representing us and our collaboration partners.

Third-party claims of intellectual property infringement may expose us to substantial liability or may prevent or delay our or our collaboration partners’ development and commercialization efforts.

Numerous EU- and foreign-issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are developing product candidates. For example, we are aware of third-party patents or patent applications that may be construed to cover one or more of our product candidates. If these patents are asserted against us or our licensing or collaboration partners and either we or our licensing or collaboration partners are found to infringe any of these patents, and are unsuccessful in demonstrating that such patents are invalid or unenforceable, then we and our licensing or collaboration partners could be required to pay substantial monetary damages or cease further development or commercialization of one or more of our product candidates or be compelled to enter into onerous licenses with such third parties. There may also be other third-party patents or patent applications with claims to materials, formulations, methods of manufacture or methods of treatment related to the use or manufacture of our product candidates and technology. Although we generally conduct a freedom-to-operate search and review with respect to our product candidates, we cannot guarantee that our search and review is complete and thorough, nor can we be sure that we have identified each and every patent and pending application in the U.S. and abroad that is relevant or necessary to the manufacturing or commercialization of our product candidates or use of our technology. Because patent applications can take many years to issue, there may be currently pending patent applications that may later result in issued patents that our product candidates may infringe. In addition, third parties may file and obtain additional patents in the future and claim that use of our technologies infringes upon these patents.

 

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Third parties may assert infringement claims against us based on existing patents or on patents that may be granted in the future, regardless of merit. Even if we believe such claims are without merit, a court of competent jurisdiction could hold that these third-party patents are valid, enforceable and infringed, which could materially and adversely affect our or our collaboration partners’ ability to commercialize our product candidates or technologies covered by the asserted third-party patents.

Parties making claims against us may also obtain injunctive or other equitable relief, which could effectively block our or our collaboration partners’ ability to further develop and commercialize one or more of our product candidates. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of management and employee resources from our business. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, pay royalties, redesign our infringing products or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure. Any of the foregoing could have a material and adverse effect on our business, financial conditions, results of operations and prospects.

In addition, claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business, financial condition, results of operations and prospects.

There could also be public announcements of the results of hearings, motions, decisions, or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our Shares.

Some of our competitors may have substantially greater resources and more mature and developed intellectual property portfolios than we do and may be able to sustain the costs of complex intellectual property litigation to a greater degree and for longer periods of time than we could. In addition, patent-holding companies that focus solely on extracting royalties and settlements by enforcing patent rights may target us. As the pharmaceutical and biopharmaceutical industries expand and more patents are issued, the risk increases that our product candidates may be subject to claims of infringement of the patent rights of third parties. The uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.

We may be subject to claims that our employees, consultants, or independent contractors have wrongfully used or disclosed confidential information of third parties or that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.

We employ and utilize the services of individuals who were previously employed or provided services to universities or other pharmaceutical or biopharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees, consultants, and independent contractors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietary information, of any of our employees’, consultants’ or independent contractors’ former employers or of other third parties. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel, which could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

 

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In addition, although it is our policy to require our employees, consultants and independent contractors who may be involved in the conception or development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who, in fact, conceives or develops intellectual property that we regard as our own. The assignment of intellectual property rights may not be self-executing or the assignment agreements may be breached, and we may be forced to bring claims against third parties, or defend claims that they may bring against us, to determine the ownership of what we regard as our intellectual property.

We may not be able to protect our intellectual property rights throughout the world.

Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries may be less extensive than those in the U.S. or Europe. In addition, the laws of different countries do not protect intellectual property rights to the same extent as the laws in the U.S. or Europe. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the U.S. or Europe, or from selling or importing products made using our inventions in and into the U.S., Europe or other jurisdictions. In the ordinary course of prosecution and maintenance activities, we determine whether to seek patent protection outside the U.S. and Europe and in which countries. This also applies to patents we have acquired or in-licensed from third parties. In some cases, we, or our predecessors in interest or licensors of patents within our portfolio, have sought patent protection in a limited number of countries for patents covering our product candidates. Competitors may use our technologies and products in jurisdictions where we have not obtained or are unable to adequately enforce patent protection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection but enforcement is not as strong as that in the U.S. or Europe. These products may compete with our products and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing, which would have a material adverse effect on our business and financial positions.

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets, and other intellectual property protection, particularly those relating to biotechnology products, which could make it difficult for us to stop the infringement, misappropriation or other violations of our intellectual property and proprietary rights. Proceedings to enforce our patent rights in foreign jurisdictions, whether or not successful, could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing, and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

We may be unable to protect our trade secrets, know-how and technologies.

We also rely on trade secrets and non-patentable know-how and technologies it seeks to protect, in part, by confidentiality agreements with our employees, consultants, suppliers, licensees and other contractual parties. Trade secrets and non-patentable know-how and technologies are difficult to protect. There can be no assurance that these agreements represent effective protection or that they will not be breached, that we would have adequate remedies for any breach, or that our trade secrets or non-patentable know-how and technologies will not otherwise become known or be independently developed by competitors and other third parties.

These and other factors, alone or together, may have a material adverse effect on our business, financial condition, results of operations and growth prospects as well as the price of our shares.

 

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Risks related to our Financial Condition and Results of Operations

We are a commercial-stage biopharmaceutical company with a history of operating losses.

We incurred a net loss (defined as net loss attributable to owners of the Company) of approximately CHF 34.3 million for the year ended December 31, 2021 and had accumulated losses at consolidation level of approximately CHF 69.8 million as of December 31, 2021. We incurred a net loss of approximately CHF 26.3 million for the six months ended June 30, 2022 and a net loss of approximately CHF 14.7 million for the six months ended June 30, 2021, and has accumulated losses at the consolidation level of approximately CHF 96.3 million at June 30, 2022. We may continue to incur losses in the foreseeable future as development expenses and other operating expenses may exceed future revenue.

Our losses have resulted principally from research and development expenses and from general business and administrative expenses. We expect to continue to incur significant operating losses in the future as we continue our research and development efforts for our current and future product candidates and seek to obtain regulatory approval and commercialization of such product candidates.

To date, we have financed our liquidity requirements primarily from equity financings and loans from our main shareholder. Biopharmaceutical and pharmaceutical product development are highly speculative undertakings and involve a substantial degree of risk.

If we fail to obtain additional funding, we may delay, reduce or eliminate our product development programs or commercialization efforts.

We are currently advancing our product candidates through clinical development, either together with a collaboration partner or independently. We expect our research and development expenses to continue to increase in connection with our ongoing activities, particularly as we and/or our collaboration partners continue our ongoing studies and initiate new studies and initiate preclinical and clinical development of our product candidates.

As of December 31, 2021, we had cash and cash equivalents of approximately CHF 44.8 million, As of December 19, 2022, we have cash and cash equivalents of approximately CHF 19.9 million.

Based on current financial current projections, available cash and possible net proceeds from this offering, we expect that we have sufficient resources to fund operations into 2024.

Accelerated growth strategy, potential milestone payments, and acquisitions will require significant additional funding. We may also need to raise additional funds due to various factors such as the scope and rate of progress of our development activities, regulatory approval outcomes and emergence of competing technologies, among others. There can be no assurance that our commercialization efforts will be successful or if we need additional funding in the future, whether such funding will be available to us.

We expect that we will require additional capital to develop and commercialize certain of our product candidates. If we receive regulatory approval for our current and future product candidates, and if we have not already licensed such product candidate to a collaboration partner and choose to commercialize such product candidate independently, we expect to incur significant commercialization expenses related to product manufacturing, sales, marketing, distribution and establishing a regulatory structure, depending on where we choose to commercialize. Additional funds may not be available on a timely basis, on favorable terms, or at all, and such funds, if raised, may not be sufficient to enable us to continue to implement our long-term business strategy. Additionally, we may be dependent on the status of the capital markets at the time such capital is sought. If we are not able to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts.

 

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Raising additional capital may cause dilution to our shareholders, restrict our operations or require us to relinquish rights to our intellectual property or future revenue streams.

Until such time, if ever, as we can generate substantial product revenue, we expect to finance our liquidity needs through a combination of equity offerings, debt financings, grants, and license and development agreements in connection with collaborations. We do not have any material committed external source of funds. In the event we need to seek additional funds, we may raise additional capital through the sale of equity, convertible debt or other securities, and through drawdowns from our Share Subscription Facility in place with GEM Global Yield LLC SCS (“GEM”). In such an event, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a holder of our Shares. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or proposing dividends to our shareholders.

If we raise additional funds through collaborations, strategic alliances, or marketing, distribution or licensing arrangements with third parties, we may have to grant or otherwise relinquish valuable rights to our intellectual property or future revenue streams.

Our ability to use tax loss carry-forwards may be limited.

As of December 31, 2021, we had consolidated tax loss carry-forwards for purposes of Swiss corporate income tax in the aggregate amount of approximately CHF 136.4 million, which could be available to offset future taxable income. If not used, these tax losses will expire seven years after the year in which they were incurred. Due to our limited income, there is a high risk that the tax loss carryforwards will expire partly or entirely and we will not be able to use them to offset future taxable income thereafter for corporate income tax purposes. Further, taxable income generated by an entity of the group may only be offset against carried forward losses incurred by the same entity, hence reducing the overall likelihood of benefiting from these losses.

Exchange rate fluctuations may materially affect our results of operations and financial condition.

As our reporting currency is the Swiss franc, transactions and balance sheet items denominated in foreign currencies are converted into Swiss francs at the applicable exchange rates. Our current expenses are denominated in Swiss francs, U.S. Dollars and Euros. In the future, we expect that the majority of our revenue and expenses will be in U.S. Dollars and Euros. Therefore, unfavorable developments in the value of the Swiss franc as compared to the U.S. Dollar and Euro could have a material adverse effect on our business, financial condition and results of operations.

Risks related to regulation of our business

The SIX Exchange Regulation AG has launched an investigation into Relief, the results of which are uncertain.

The SIX Exchange Regulation AG – the self-regulatory supervisory body for issuers listed on the SIX Swiss Exchange – has launched a formal investigation into Relief due to potential violations of the rules on ad-hoc publicity. While we do not believe that this investigation will have a material adverse effect on our business, there can be no assurance of that conclusion.

 

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We cannot give any assurance that any of our product candidates in development will receive regulatory approval, which is necessary before they can be commercialized.

We cannot be certain that any of our product candidates in development will be successful in clinical studies or receive regulatory approval. Applications for our product candidates could fail to receive regulatory approval for many reasons, including but not limited to the following:

 

   

the FDA, EMA, Swissmedic or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical studies;

 

   

the population studied in the clinical program may not be sufficiently broad or representative to assure safety in the full population for which we seek approval;

 

   

the FDA, EMA, Swissmedic or comparable foreign regulatory authorities may disagree with our interpretation of data from nonclinical or clinical studies;

 

   

the data collected from clinical studies of our product candidates may not be sufficient to support the submission of an NDA or other submission or to obtain regulatory approval in the U.S., Switzerland or elsewhere;

 

   

we may be unable to demonstrate to the FDA, EMA, Swissmedic or comparable foreign regulatory authorities that a product candidate’s benefit-risk ratio for its proposed indication is acceptable;

 

   

the FDA, EMA, Swissmedic or other regulatory authorities may fail to approve the manufacturing processes, test procedures and specifications, or facilities of third-party manufacturers with which we contract for clinical and commercial supplies; and

 

   

the approval policies or regulations of the FDA, EMA, Swissmedic or comparable foreign regulatory authorities may change significantly in a manner rendering our clinical data insufficient for approval.

We generally plan to seek regulatory approval to commercialize our product candidates in the U.S., the EU, Switzerland and in additional foreign countries where we have commercial and typically IP rights. To obtain regulatory approval in other countries, we must comply with numerous and varying regulatory requirements of such other countries regarding safety, efficacy, chemistry, manufacturing and controls, clinical studies, commercial sales, pricing, marketing and distribution of our product candidates. Even if we are successful in obtaining approval in one jurisdiction, we cannot ensure that we will obtain approval in any other jurisdictions. Failure to obtain marketing authorization for our product candidates will result in our being unable to market and sell such products, which would materially adversely affect our business, financial condition and results of operations. If we fail to obtain approval in any jurisdiction, the geographic market for our product candidates could be limited.

Similarly, regulatory agencies may not approve the labeling claims that are necessary or desirable for the successful commercialization of our product candidates.

Clinical drug development involves a lengthy and expensive process with uncertain timelines and uncertain outcomes. If clinical studies of our product candidates are prolonged or delayed, we may be unable to obtain required regulatory approvals, and therefore be unable to commercialize our product candidates on a timely basis or at all.

In order to commercialize any of our product candidates, we or our partners must obtain the necessary regulatory approvals to market and sell such product. To obtain that approval, we must demonstrate through extensive preclinical and clinical studies that our products are safe and effective in humans. Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical study process. The results of preclinical and early clinical studies of our

 

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product candidates may not be predictive of the results of later-stage clinical studies. For example, the positive results generated to date in clinical studies for our product candidates do not ensure that later clinical studies will demonstrate similar results. Product candidates in later stages of clinical studies may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and initial clinical studies. A number of companies in the pharmaceutical or biopharmaceutical industry, including us, have suffered significant setbacks in advanced clinical studies due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier studies. Our future clinical study results may not be successful.

Clinical studies must be conducted in accordance with the legal requirements, regulations or guidelines of the FDA, EMA, Swissmedic and comparable regulatory authorities, and are subject to oversight by these governmental agencies and Institutional Review Boards (“IRBs”) at the medical institutions where the clinical studies are conducted. In addition, clinical studies must be conducted with supplies of our product candidates produced under cGMP and other requirements. We depend on medical institutions and CROs to conduct our clinical studies in compliance with cGCP standards. To the extent the CROs fail to enroll participants for our clinical studies, fail to conduct the study to cGCP standards or are delayed for a significant time in the execution of studies, including achieving full enrollment, we may be affected by increased costs, program delays or both, which may harm our business.

The completion of clinical studies for our clinical product candidates may be delayed, suspended or terminated as a result of many factors, including but not limited to:

 

   

the delay or refusal of regulators or IRBs to authorize us to commence or amend a clinical study at a prospective study site or changes in regulatory requirements, policies and guidelines;

 

   

delays or failure to reach agreement on acceptable terms with prospective CROs and clinical study sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and study sites;

 

   

delays in patient enrollment and variability in the number and types of patients available for clinical studies;

 

   

the inability to enroll a sufficient number of patients in studies to ensure adequate statistical power to detect statistically significant treatment effects;

 

   

negative or inconclusive results, which may require us to conduct additional preclinical or clinical studies or to abandon projects that we expected to be promising;

 

   

safety or tolerability concerns, which could cause us to suspend or terminate a study if we find that the participants are being exposed to unacceptable health risks;

 

   

regulators or IRBs requiring that we or our investigators suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements or safety concerns, among others;

 

   

lower than anticipated retention rates of patients and volunteers in clinical studies;

 

   

our CROs or clinical study sites failing to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all, deviating from the protocol or dropping out of a study;

 

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delays relating to adding new clinical study sites;

 

   

difficulty in maintaining contact with patients after treatment, resulting in incomplete data;

 

   

delays in establishing the appropriate dosage levels;

 

   

the quality or stability of the product candidate falling below acceptable standards;

 

   

the inability to produce or obtain sufficient quantities of the product candidate to complete clinical studies; and

exceeding budgeted costs due to difficulty in accurately predicting costs associated with clinical studies.

Any delays in completing our clinical studies will increase our costs, slow our product candidate development and approval process, and jeopardize our ability to commence product sales and generate sales revenues. Any of these occurrences may significantly harm our business, financial condition and prospects. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical studies may also ultimately lead to the denial of regulatory approval of certain of our product candidates.

Even if we obtain and maintain approval for certain of our drug candidates from one jurisdiction, we may never obtain approval for our drug candidates in other jurisdictions, which would limit our market opportunities and adversely affect our business.

Sales of our approved drugs will be subject to U.S. and non-U.S. regulatory requirements governing clinical studies and regulatory approval, and we plan to seek regulatory approval to commercialize our drug candidates in the U.S., the European Economic Area (“EEA”), Switzerland and other countries. Clinical studies conducted in one country may not be accepted by regulatory authorities in other countries, and regulatory approval in one country does not ensure approval in any other country, while a failure or delay in obtaining regulatory approval in one country may have a negative effect on the regulatory approval process in others. For example, approval in the U.S. by the FDA does not ensure approval by the regulatory authorities in other countries or jurisdictions, and similarly, approval by a non-U.S. regulatory authority, such as the EMA, does not ensure approval by regulatory authorities in other countries, including by the FDA. However, the failure to obtain approval in one jurisdiction may have a negative impact on our ability to obtain approval elsewhere. Approval processes and regulatory requirements vary among countries and can involve additional drug testing and validation and additional administrative review periods. Even if a drug is approved, the FDA or EMA, as the case may be, may limit the indications for which the drug may be marketed, require extensive warnings on the drug labeling, or require expensive and time-consuming clinical studies or reporting as conditions of approval. In many countries outside the U.S., a drug candidate must be approved for reimbursement before it can be approved for sale in that country. In some cases, the price that would be charged for a drug is also subject to approval. Regulatory authorities in other countries also have their own requirements for approval of drug candidates with which we must comply prior to marketing in those countries. Obtaining non-U.S. regulatory approvals and compliance with such non-U.S. regulatory requirements could result in significant delays, difficulties and costs for us and could delay or prevent the introduction of our current and any future drugs, in certain countries. If we fail to comply with regulatory requirements in international markets or to obtain and maintain required approvals, or if regulatory approvals in international markets are delayed, our target market will be reduced and our ability to realize the full market potential of our drug candidates will be unrealized.

 

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Even if certain of our product candidates obtain regulatory approval, we will be subject to ongoing obligations and continued regulatory review, which may result in significant additional expenses. Additionally, our additional product candidates, if approved, could be subject to labeling and other restrictions and market withdrawal and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our products.

If marketing authorization is obtained for certain of our product candidates, the products will remain subject to continual regulatory review and therefore authorization could be subsequently withdrawn or restricted. Any regulatory approvals that we receive for certain of our product candidates may also be subject to limitations on the approved indicated uses for which the products may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including phase 4 clinical studies, and surveillance to monitor the safety and efficacy of the product candidate. In addition, if the FDA or a comparable regulatory authority approves any of our product candidates in development, we will be subject to ongoing regulatory obligations and oversight by regulatory authorities, including with respect to the manufacturing processes, labeling, packing, distribution, adverse event reporting, storage, advertising and marketing restrictions, and record-keeping and, potentially, other post-marketing obligations, all of which may result in significant expense and limit our or our collaboration partners’ ability to commercialize such products. These requirements include submissions of safety and other post-marketing information and reports, registration, as well as continued compliance with cGMP and cGCP requirements for any clinical studies that we conduct post-approval. Later discovery of previously unknown problems with a product, including AEs of unanticipated severity or frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in, among other things:

 

   

restrictions on the marketing or manufacturing of the product, withdrawal of the product from the market, or voluntary or mandatory product recalls;

 

   

fines, warning letters or holds on clinical studies;

 

   

refusal by the FDA to approve pending applications or supplements to approved applications filed by us, or suspension or revocation of product license approvals;

 

   

regulatory constraints in promotion and distribution of drug products in various markets;

 

   

product seizure or detention, or refusal to permit the import or export of products; and

 

   

injunctions or the imposition of civil or criminal penalties.

If any of these events occurs, our ability to sell such product may be impaired, and we may incur substantial additional expense to comply with regulatory requirements, which could materially adversely affect our business, financial condition and results of operations. Regulatory policies may be enacted that could prevent, limit or delay regulatory approval of our product candidates. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained, which would adversely affect our business, prospects and ability to achieve or sustain profitability.

We have conducted and may in the future conduct clinical studies for our drug candidates outside the U.S., Europe and Switzerland, and the FDA, EMA and Swissmedic and applicable foreign regulatory authorities may not accept data from such studies.

We, or our collaboration partners, have conducted and may in the future choose to conduct one or more of our clinical studies outside the U.S., Europe and Switzerland. The acceptance of study data from clinical studies conducted outside the U.S., Europe and Switzerland or another jurisdiction by the FDA, EMA and Swissmedic or applicable foreign regulatory authority may be subject to certain conditions. In cases where data from foreign clinical studies are intended to serve as the basis for marketing approval, for instance in

 

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the U.S., the FDA will not approve the application on the basis of foreign data alone unless the following are true: the data are applicable to the U.S. population and U.S. medical practice; the studies were performed by clinical investigators of recognized competence; and the data are considered valid without the need for an on-site inspection by the FDA or, if the FDA considers such an inspection to be necessary, the FDA is able to validate the data through an on-site inspection or other appropriate means. Additionally, the FDA’s clinical study requirements, including sufficient size of patient populations and statistical powering, must be met. Many foreign regulatory bodies have similar requirements. In addition, such foreign studies would be subject to the applicable local laws of the foreign jurisdictions in which the studies are conducted. There can be no assurance that the FDA, EMA, Swissmedic or any applicable foreign regulatory authority will accept data from studies conducted outside of the U.S. or the applicable jurisdiction. If the FDA, EMA, Swissmedic or any applicable foreign regulatory authority does not accept such data, it would result in the need for additional studies, which would be costly and time-consuming and delay aspects of our business plan, and which may result in our drugs or drug candidates not receiving approval or clearance for commercialization in the applicable jurisdiction.

Our business is subject to complex and evolving U.S. and international laws and regulations regarding clinical trials reimbursement and privacy and data protection. Many of these laws and regulations are subject to change and uncertain interpretation and could result in claims, changes to our business practices, penalties, increased cost of operations, or declines in user growth or engagement, or otherwise harm our business.

Regulatory authorities around the world have adopted laws and regulations, and are continuing to consider a number of legislative and regulatory proposals, concerning privacy and data protection, including measures to ensure that encryption of users’ data does not hinder access of law enforcement agencies to that data. In addition, the interpretation and application of consumer and data protection laws in the U.S., Europe, Switzerland and elsewhere are often uncertain and in flux. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our data practices. These laws and regulations, and legislative and regulatory proposals, if adopted, and such interpretations could, in addition to the possibility of fines, result in an order requiring that we change our data practices, which could have an adverse effect on our business and results of operations. Complying with these various laws could cause us to incur substantial costs or require us to change our business practices in a manner adverse to our business.

In the EU, new clinical trial regulations came into force on January 31, 2022. This new legislation enforces the centralization of clinical trial applications and approvals, New clinical trial sponsors must begin using the new system by January 31, 2023, and any previously approved trial sponsors must comply from January 31, 2025, but in some cases, this may extend timelines for clinical study approvals, due to potentially longer wait times enabling sponsors to apply for trial authorization in up to 30 European countries with a single online application. The General Data Protection Regulation (“GDPR”), which became effective in May 2018 in all EU member states, created a range of new compliance obligations for companies that process the personal data of EU residents. Although it is expected that the GDPR will provide consistency across the territory of the EU, it imposes more onerous requirements concerning consent and the obligations of sponsors of clinical trials (acting as data controllers), among other measures, which may increase the costs and extend the timelines of our product development efforts. Austerity measures in certain European nations may also affect the prices we are able to seek if our products are approved, as discussed below. Furthermore, the Brexit vote and the impact of the withdrawal of the UK may adversely affect business activity, political stability and economic conditions in the UK, the Eurozone, the EU and elsewhere. Specifically, Brexit and ongoing developments in the UK have created uncertainty with regard to data protection regulation in the UK. We may be required to comply with both the GDPR and the UK GDPR, exposing us to two parallel regimes with potentially divergent interpretations and enforcement actions for certain violations. The relationship between the UK and the EU in relation to certain aspects of data protection law remains unclear, for example, how data transfers between EU member states and the UK will be treated and the role of the UK’s Information Commissioner’s Office with respect to the EU following the end of the transitional period. Although we do not have material operations in the UK, we cannot rule out potential disruptions in relation to the clinical regulatory framework applicable to our clinical studies in the UK, and to data privacy and security rules with respect to personal data sharing with vendors and clinical investigators in the UK, and we cannot predict future implications.

 

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Both in the U.S. and in the EU, legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical and biopharmaceutical products. We do not know whether additional legislative changes will be enacted, whether the regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our product candidates, if any, may be.

We could be subject to liabilities under environmental, health and safety laws or regulations, or fines, penalties or other sanctions, if we fail to comply with such laws or regulations or otherwise incur costs that could have a material adverse effect on the success of our business.

We are subject to numerous environmental, health and safety laws, regulations, and permitting requirements, including those governing laboratory procedures, decontamination activities, and the handling, transportation, use, remediation, storage, treatment and disposal of hazardous materials, human substances and wastes. Our operations involve the use of hazardous and flammable materials, including chemicals and biological materials that produce hazardous waste products. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials or wastes either at our sites or at third-party disposal sites. In the event of such contamination or injury, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties. Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials, human substances or other work-related injuries, this insurance may not provide adequate coverage against potential liabilities.

In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws, regulations or permitting requirements. Such laws, regulations and requirements are becoming increasingly more stringent and may impair our research, development or production efforts. Failure to comply with these laws, regulations and permitting requirements also may result in substantial fines, penalties or other sanctions.

Our relationships with clinical centers, customers and payors will be subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations, which, if violated, could expose us to criminal sanctions, civil penalties, exclusion from government healthcare programs, contractual damages, reputational harm and diminished profits and future earnings.

 

   

for instance, the U.S. healthcare Anti-Kickback Statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under U.S. government healthcare programs such as Medicare and Medicaid;

 

   

for instance, the U.S. False Claims Act imposes criminal and civil penalties, including civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the U.S. government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government;

 

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for instance, the Health Insurance Portability and Accountability Act (“HIPAA”), imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;

 

   

HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;

 

   

for instance, the transparency requirements under the Health Care Reform Law require manufacturers of drugs, devices, biologics and medical supplies to report to the U.S. Department of Health and Human Services information related to payments and other transfers of value made by such manufacturers to physicians and teaching hospitals, and ownership and investment interests held by physicians or their immediate family members; and

 

   

in various other jurisdictions, analogous laws and regulations, such as state anti-kickback and false claims laws, will apply to sales or marketing arrangements, consultancy and service agreements, and claims involving healthcare items or services reimbursed by nongovernmental third-party payors, including private insurers, and some state laws require pharmaceutical and biopharmaceutical companies to comply with the pharmaceutical and biopharmaceutical industries’ voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, in addition to requiring manufacturers to report information related to payments to physicians and other healthcare providers or marketing expenditures.

Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available under the U.S. federal Anti-Kickback Statute, it is possible that some of our future business activities could be subject to challenge under one or more of such laws. In addition, recent healthcare-reform legislation has strengthened these laws. For example, the Health Care Reform Law, among other things, amends the intent requirement of the federal anti-kickback and criminal healthcare fraud statutes. A person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it. Moreover, the Health Care Reform Law provides that the government may assert that a claim including items or services resulting from a violation of the federal anti-kickback statute constitutes a false or fraudulent claim for purposes of the False Claims Act.

Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, exclusion from U.S. government-funded healthcare programs, such as Medicare and Medicaid, other foreign healthcare reimbursement and procurement programs, and the curtailment or restructuring of our operations. If any of the physicians or other providers or entities with whom we expect to do business with is found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government-funded healthcare programs.

 

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Risks Related to the Offering and the ADSs

The price of the ADSs may be volatile and may fluctuate due to factors beyond our control. An active trading market may not develop and/or may not be sustained following the offering. You may not be able to resell the ADSs at or above the public offering price.

Prior to this offering, while our ordinary shares have been traded on the SIX Swiss Exchange, there has been no public market on a U.S. national securities exchange for the ADSs or our ordinary shares in the United States. If you purchase ADSs in this offering, you may not be able to resell those ADSs at or above the public offering price. The trading price of the ordinary shares has fluctuated and is likely to continue to fluctuate substantially. The trading price of those securities depends on a number of factors, including those described in this “Risk Factors” section, many of which are beyond our control and may not be related to our operating performance. In addition, although we anticipate our ADSs being approved for listing on the Nasdaq Global Market, an active trading market for our ADSs may never develop or be sustained following this offering. The offering price of our ADSs will be determined through negotiations between us and the underwriters. The offering price may not be indicative of the market price of our ADSs or ordinary shares after this offering.

The market price of the ADSs and our ordinary shares is volatile and may fluctuate significantly due to a variety of factors, many of which are beyond our control, including:

 

   

positive or negative results of testing and clinical trials reported or conducted by us, strategic partners or competitors;

 

   

delays in entering into strategic relationships with respect to development or commercialization of our product candidates or entering into strategic relationships on terms that are not deemed to be favorable to us;

 

   

technological innovations or commercial product introductions by us or competitors;

 

   

changes in government regulations;

 

   

developments concerning proprietary rights, including patents and litigation matters;

 

   

public concern relating to the commercial value or safety of any of our product candidates;

 

   

financing or other corporate transactions;

 

   

publication of research reports or comments by securities or industry analysts;

 

   

general market conditions in the pharmaceutical industry or in the economy as a whole;

 

   

impact of the COVID-19 pandemic on the economy or financial markets; or

 

   

price and volume fluctuations attributable to inconsistent trading volume levels of the ADSs and/or ordinary shares.

These and other market and industry factors may cause the market price and demand for the ADSs and ordinary shares to fluctuate substantially, regardless of our actual operating performance, which may limit or prevent investors from readily selling their ADSs or ordinary shares and may otherwise negatively affect the liquidity of the ADSs and ordinary shares. In addition, the stock market in general, and biopharmaceutical companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies.

 

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The consummation of the offering is dependent upon our receipt of listing approval from the Nasdaq Stock Market.

We have applied to list our ADSs on the Nasdaq Global Market. While we expect that we will receive approval to list our ADSs on Nasdaq, there can be no assurance that we will receive such approval. If we are unable to receive approval to list our ADSs on Nasdaq, this offering will be cancelled, and any amounts already received from investors will be refunded.

A significant shareholder will continue to own a substantial number of our securities and as a result, may be able to exercise significant influence over the outcome of shareholder votes. This shareholder may have different interests from us or your interests.

We have few significant shareholders. For an overview of our current significant shareholders, please see “Principal Shareholders.” Following the completion of this offering, this significant shareholder and its affiliates will own approximately 22.1% of our ordinary shares (including ordinary shares represented by the ADSs).

Currently, we are not aware that any of our existing shareholders have entered or will enter into a shareholders’ agreement with respect to the exercise of their voting rights. Nevertheless, depending on the level of attendance at our annual general meetings of shareholders (“AGM”), or the General Meeting, this significant shareholder could have the ability to significantly influence the outcome of decisions taken at any such AGM. Any such voting by this shareholder may not be in accordance with our interests or those of our other shareholders. Among other consequences, this concentration of ownership may have the effect of delaying or preventing a change in control and might therefore negatively affect the market price of the ADSs.

Future sales, or the possibility of future sales, of a substantial number of our securities could adversely affect the price of the shares and dilute shareholders.

If our existing shareholders sell, or indicate an intent to sell, substantial amounts of our securities in the public market, the trading price of the ADSs and our ordinary shares could decline significantly and, in case of the ADSs, could decline below the public offering price in this offering. Upon completion of this offering, assuming the sale of 883,333,200 ordinary shares, will have 5,026,173,985 ordinary shares outstanding (including ordinary shares represented by the ADSs), less than 1% of which, subject to limited exceptions, are subject to a 90-day contractual lock-up. The representative of the underwriters may permit us and the holders of the shares subject to lock-up agreements to sell shares or ADSs prior to the expiration of the lock-up agreements. See “Underwriting (Conflicts of Interest).” After the lock-up agreements pertaining to this offering expire, and based on the number of ordinary shares (including ordinary shares represented by ADSs) outstanding upon completion of this offering, these [*] additional ordinary shares will be eligible for sale in the public market, all of which shares are held by our directors and certain members of our executive management are subject to volume limitations under Rule 144 under the Securities Act of 1933, as amended, or the Securities Act, for sales in the United States. In addition, ordinary shares subject to outstanding options under our equity incentive plans and the ordinary shares reserved for future issuance under our equity incentive plan will become eligible for sale in the public market in the future, subject to certain legal and contractual limitations.

We intend to register all ordinary shares that we may issue under our equity compensation plans. Once we register these ordinary shares, they can be freely sold in the public market upon issuance, subject to volume limitations applicable to affiliates and the lock-up agreements described in the “Shares and ADSs Eligible for Future Sale” section of this prospectus.

Provisions of our articles of association or Swiss corporate law might deter acquisition bids for us that might be considered favorable and prevent or frustrate any attempt to replace or remove the then board of directors.

Provisions of our articles of association may make it more difficult for a third party to acquire control of us. For example, in connection with an authorized share capital increase, our board of directors is authorized to restrict or exclude the subscription rights of shareholders and allocate them to third parties as a defense of an actual, threatened or potential takeover bid, in relation to which our board of directors, upon consultation with an independent financial adviser retained by it, has not recommended to the shareholders acceptance on the basis that the board of directors has not found the takeover bid to be financially fair to the shareholders. In addition, provisions of our articles of association may provide that in connection with a conditional share capital increase, the subscription rights and preemptive rights of shareholders are excluded.

 

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In addition, several provisions of Swiss corporate law and certain other provisions of Swiss law, such as obligations to disclose significant shareholdings, insider rules, ad hoc publicity rules of SIX Swiss Exchange, and merger control regulations, that apply to us may make an unsolicited tender offer, merger, change in management or other change in control of our company more difficult. These provisions could discourage potential takeover attempts that other shareholders may consider to be in their best interest and could adversely affect the market price of our securities. These provisions may also have the effect of depriving ADS holders of the opportunity to sell their ADSs at a premium. In addition, the board of directors of Swiss companies may in certain instances, and subject to prior authorization by the shareholders, deter or frustrate public takeover bids through dilutive issuances of equity securities (pursuant to the authorized capital) or through share buy-backs.

If you purchase securities in this offering, you will suffer immediate dilution of your investment.

The public offering price of the Units is substantially higher than the as adjusted net tangible book value per ADS. Therefore, if you purchase Units in this offering, you will pay an effective price per ADS that substantially exceeds our as adjusted net tangible book value per ADS after this offering. To the extent outstanding options are exercised, you will incur further dilution. Based on the assumed public offering price of $6.00 per Unit, which is the midpoint of the price range set forth on the cover of this prospectus, you will experience immediate dilution of $6.62 per ADS, representing the difference between our as adjusted net tangible book value per ADS after giving effect to this offering and the public offering price. See “Dilution.”

We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.

Our board of directors will have broad discretion in the application of the net proceeds from this offering and could spend the proceeds in ways that do not improve our results of operations or enhance the value of the ADSs. The failure by our board of directors to apply these funds effectively could result in financial losses that could have a material adverse effect on our business, cause the price of the ADSs to decline and delay the development of our product candidates. Pending their use, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value.

Because Raghuram (Ram) Selvaraju, Ph.D., MBA, our Chairman, is associated person of Wainwright, Wainwright is deemed to have a “conflict of interest” under FINRA Rule 5121.

Because Raghuram (Ram) Selvaraju, Ph.D., MBA, our Chairman, is a managing director of equity research at Wainwright and an associated person of Wainwright, Wainwright is deemed to have a “conflict of interest” under Rule 5121 of FINRA. Accordingly, this offering will be made in compliance with the applicable provisions of Rule 5121. The rule requires that a “qualified independent underwriter” meeting certain standards participate in the preparation of the registration statement and prospectus and exercise the usual standards of due diligence with respect thereto. Brookline Capital Markets, a division of Arcadia Securities, LLC (“Brookline”) has agreed to act as a “qualified independent underwriter” within the meaning of Rule 5121 in connection with this offering. Brookline will receive $250,000 for serving as a qualified independent underwriter in connection with this offering. In its role as qualified independent underwriter, Brookline has participated in due diligence and the preparation of this prospectus and the registration statement of which this prospectus forms a part and has exercised the usual standards of due diligence with respect thereto. We have agreed to indemnify Brookline against liabilities incurred in connection with acting as qualified independent underwriter, including liabilities under the “Securities Act. In accordance with Rule 5121, Wainwright will not sell our ADRs to a discretionary account without the prior written approval from the account holder. See the section of this prospectus captioned “Underwriting (Conflicts of Interest)” for additional information.

Fluctuations in exchange rates may increase the risk of holding ADSs and ordinary shares.

Due to the international scope of our operations, our assets, earnings and cash flows are influenced by movements in exchange rates of several currencies, particularly the euro, U.S. dollar and Swiss franc. Our functional currency is the Swiss franc, and the majority of our operating expenses are paid in Swiss franc, but we also receive or may receive payments from business partners in U.S. dollars, and we regularly acquire services, consumables and materials in U.S. dollars and euros. Further, potential future revenue may be derived from abroad, particularly from the United States or the European Union. As a result, our business and the price of the ADSs and ordinary shares may be affected by fluctuations in foreign exchange rates between the Swiss franc and these other currencies, which may also have a significant impact on our reported results of operations and cash flows from period to period. Besides natural hedging, currently, we do not have any exchange rate hedging arrangements in place.

Moreover, because our ordinary shares currently trade on the SIX Swiss Exchange in Swiss francs, and the ADSs will trade on the Nasdaq Global Market (if our application is accepted) in U.S. dollars, fluctuations in the exchange rate between the U.S. dollar and the Swiss franc may result in temporary differences between the value of the ADSs and the value of our ordinary shares, which may result in heavy trading by investors seeking to exploit such differences.

 

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We will be traded on more than one market and this may result in price variations and adversely affect the liquidity and value of the ADSs; in addition, investors may not be able to easily move ordinary shares for trading between such markets. Furthermore, because of this dual listing, securities and stock exchange laws, regulations and rules will apply to us that may be irreconcilable or otherwise difficult to comply with contemporaneously.

Our ordinary shares have traded on the SIX Swiss Exchange since 2009 and, assuming our listing application is accepted, our ADSs will be traded on the Nasdaq Global Market. Trading in our ADSs or ordinary shares on these markets takes place in different currencies (U.S. dollars on the Nasdaq Global Market and Swiss Francs on the SIX Swiss Exchange), and at different times (resulting from different time zones, different trading days and different public holidays in the United States and Switzerland). The trading prices of our ordinary shares and our ADSs on these two markets may differ due to these and other factors. Any decrease in the price of our ordinary shares on the SIX Swiss Exchange could cause a decrease in the trading price of our ADSs on the Nasdaq Global Market. Investors could seek to sell or buy our ordinary shares to take advantage of any price differences between the markets through a practice referred to as arbitrage. Any arbitrage activity could create unexpected volatility in both our share prices on one exchange and the ordinary shares available for trading on the other exchange. In addition, holders of ADSs cannot immediately surrender their ADSs and withdraw the underlying ordinary shares for trading on the other market without effecting necessary procedures with the depositary. This could result in time delays and additional cost for holders of ADSs. Further, the Warrants being offered are not registered with any securities exchange, and we do not plan to seen such registration.

Additionally, the property rights attached to our ordinary shares transfer to a holder of those shares upon purchasing such shares in a stock market transaction. Any voting rights or rights related to voting rights only transfer once the acquirer has been registered in the share register as shareholder with voting rights of such ordinary shares. Holders of ADSs are, in such capacity, not directly registered in the share register and can thus enjoy the property and voting rights and rights related to voting rights attached to the ADSs only through the entity that acts as nominee or depositary for those ADSs and is recorded in the share register. It is possible that a nominee or a depositary will be unwilling to exercise certain rights attached to the ordinary shares, such as rights that require litigation. Therefore, failing to register in the share register may result in your inability to exercise certain rights as a shareholder.

Holders of ADSs are not treated as holders of our ordinary shares.

By participating in this offering, you will become a holder of ADSs with underlying ordinary shares in a Swiss corporation (Société Anonyme). Holders of ADSs are not treated as holders of our ordinary shares, unless they withdraw the ordinary shares underlying their ADSs in accordance with the deposit agreement and applicable laws and regulations. The depositary is the holder of the ordinary shares underlying the ADSs. Holders of ADSs therefore do not have any rights as holders of our ordinary shares, other than the rights that they have pursuant to the deposit agreement. See “Description of American Depositary Shares.”

Except as described in this prospectus and the deposit agreement, holders of the ADSs will not be able to exercise voting rights attaching to the ordinary shares represented by the ADSs. Under the terms of the deposit agreement, holders of the ADSs may instruct the depositary to vote the ordinary shares underlying their ADSs. Otherwise, holders of ADSs will not be able to exercise their right to vote unless they withdraw the ordinary shares underlying their ADSs in accordance with the deposit agreement and applicable laws and regulations to vote them in person or by proxy in accordance with applicable Swiss laws and regulations and our articles of association. Even so, ADS holders may not know about a meeting far enough in advance to withdraw those ordinary shares. If we ask for the instructions of holders of the ADSs, the depositary, upon timely notice from us, will notify ADS holders of the upcoming vote and arrange to deliver our voting materials to them. Upon our request, the depositary will mail to holders a shareholder meeting notice that contains, among other things, a statement as to the manner in which voting instructions may be given. We cannot guarantee that ADS holders will receive the voting materials in time to ensure that they can instruct the depositary to vote the ordinary shares underlying their ADSs. In addition, regardless of whether timely voting instructions are provided to the depositary, at our request, the depositary will represent all ordinary shares underlying the ADSs for the purpose of establishing a quorum at a meeting of our shareholders. A shareholder is only entitled to participate in, and vote at, the meeting of shareholders, provided that its

 

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shares are recorded in its name at a date preceding the date of the meeting of shareholders and communicated by Relief at least 20 days before the meeting. In addition, the depositary’s liability to ADS holders for failing to execute voting instructions or for the manner of executing voting instructions is limited by the deposit agreement. As a result, holders of ADSs may not be able to exercise their right to give voting instructions or to vote in person or by proxy and they may not have any recourse against the depositary or us if their ordinary shares are not voted as they have requested or if their shares cannot be voted.

Additionally, the financial rights attached to our ordinary shares transfer to a holder of those shares upon purchasing such shares in a stock market transaction. Any voting rights or rights related to voting rights only transfer once the acquirer has been registered in the shareholders’ register as shareholder of such ordinary shares. A beneficial owner that is not directly registered in the shareholders’ register can enjoy the financial rights, voting rights and rights related to voting rights only through the entity that acts as nominee or depositary for those ordinary shares and is recorded in the shareholders’ register as the shareholder of record of those shares. This is also the case if you hold ADSs. It is possible that a nominee or a depositary will be unwilling to exercise certain rights attached to the ordinary shares, such as rights that require litigation. Therefore, failing to register in the shareholders’ register may result in your inability to exercise certain rights as a shareholder.

Holders of ADSs may be subject to limitations on the transfer of their ADSs and the withdrawal of the underlying ordinary shares.

ADSs are transferable on the books of the depositary. However, the depositary may close its books at any time or from time to time when it deems expedient in connection with the performance of its duties. The depositary may refuse to deliver, transfer or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary think it is advisable to do so because of any requirement of law, government or governmental body, or under any provision of the deposit agreement, or for any other reason, subject to the right of ADS holders to cancel their ADSs and withdraw the underlying ordinary shares. Temporary delays in the cancellation of your ADSs and withdrawal of the underlying ordinary shares may arise because the depositary has closed its transfer books or we have closed our transfer books, the transfer of ordinary shares is blocked to permit voting at a shareholders’ meeting or we are paying a dividend on our ordinary shares. In addition, ADS holders may not be able to cancel their ADSs and withdraw the underlying ordinary shares when they owe money for fees, taxes and similar charges and when it is necessary to prohibit withdrawals in order to comply with any laws or governmental regulations that apply to ADSs or to the withdrawal of ordinary shares or other deposited securities. See “Description of American Depositary Shares-Withdrawal of Ordinary shares Upon Cancellation of ADSs.”

We are entitled to amend the deposit agreement and to change the rights of ADS holders under the terms of such agreement, or to terminate the deposit agreement, without the prior consent of the ADS holders.

We are entitled to amend the deposit agreement and to change the rights of the ADS holders under the terms of such agreement, without the prior consent of the ADS holders. We and the depositary may agree to amend the deposit agreement in any way we decide is necessary or advantageous to us or to the depositary. Amendments may reflect, among other things, operational changes in the ADS program, legal developments affecting ADSs or changes in the terms of our business relationship with the depositary. If the terms of an amendment are materially disadvantageous to ADS holders, ADS holders will only receive 30 days’ advance notice of the amendment, and no prior consent of the ADS holders is required under the deposit agreement. Furthermore, we may decide to direct the depositary to terminate the ADS facility at any time for any reason. For example, terminations may occur if we become the subject of a takeover or a going-private transaction. If the ADS facility is terminated, ADS holders will receive at least 30 days’ prior notice, but no prior consent is required from them. Under the circumstances that we decide to make an amendment to the deposit agreement that is disadvantageous to ADS holders or terminate the deposit agreement, the ADS holders may choose to sell their ADSs or surrender their ADSs and become direct holders of the underlying ordinary shares, but will have no right to any compensation whatsoever.

 

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Holders of ADSs may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable outcomes to the plaintiff(s) in any such action.

The deposit agreement governing the ADSs representing our ordinary shares provides that, to the fullest extent permitted by law, holders and beneficial owners of ADSs irrevocably waive the right to a jury trial of any claim they may have against us or the depositary arising out of or relating to the ADSs or the deposit agreement.

If this jury trial waiver provision is not permitted by applicable law, an action could proceed under the terms of the deposit agreement with a jury trial. If we or the depositary opposed a jury trial demand based on the waiver, the court would determine whether the waiver was enforceable based on the facts and circumstances of that case in accordance with the applicable state and federal law. To our knowledge, the enforceability of a contractual pre-dispute jury trial waiver in connection with claims arising under the federal securities laws has not been finally adjudicated by the United States Supreme Court. However, we believe that a contractual pre-dispute jury trial waiver provision is generally enforceable, including under the laws of the State of New York, which govern the deposit agreement, by a federal or state court in the City of New York, which has non-exclusive jurisdiction over matters arising under the deposit agreement. In determining whether to enforce a contractual pre-dispute jury trial waiver provision, courts will generally consider whether a party knowingly, intelligently and voluntarily waived the right to a jury trial. We believe that this is the case with respect to the deposit agreement and the ADSs. It is advisable that you consult legal counsel regarding the jury waiver provision before entering into the deposit agreement.

If you or any other holders or beneficial owners of ADSs bring a claim against us or the depositary in connection with matters arising under the deposit agreement or the ADSs, including claims under federal securities laws, you or such other holder or beneficial owner may not be entitled to a jury trial with respect to such claims, which may have the effect of limiting and discouraging lawsuits against us and/or the depositary. If a lawsuit is brought against us and/or the depositary under the deposit agreement, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may result in different outcomes than a trial by jury would have had, including results that could be less favorable to the plaintiff(s) in any such action, depending on, among other things, the nature of the claims, the judge or justice hearing such claims, and the venue of the hearing.

No condition, stipulation or provision of the deposit agreement or ADSs serves as a waiver by any holder or beneficial owner of ADSs or by us or the depositary of compliance with any substantive provision of the U.S. federal securities laws and the rules and regulations promulgated thereunder.

Moreover, as the jury trial waiver relates to claims arising out of or relating to the ADSs or the deposit agreement, we believe that, as a matter of construction of the clause, the waiver would likely to continue to apply to ADS holders who withdraw the ordinary shares from the ADS facility with respect to claims arising before the cancellation of the ADSs and the withdrawal of the ordinary shares, and the waiver would most likely not apply to ADS holders who subsequently withdraw the ordinary shares represented by ADSs from the ADS facility with respect to claims arising after the withdrawal. However, to our knowledge, there has been no case law on the applicability of the jury trial waiver to ADS holders who withdraw the ordinary shares represented by the ADSs from the ADS facility.

 

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We do not expect to pay dividends in the foreseeable future.

We have not paid any dividends since our incorporation. Even if future operations lead to significant levels of distributable profits, we currently intend that any earnings will be reinvested in our business and that dividends will not be paid until we have an established revenue stream to support continuing dividends. In addition, payment of any future dividends to shareholders would be subject to shareholder approval at our AGM, upon proposal of the board of directors, taking into account various factors including our business prospects, cash requirements, financial performance and new product development. In addition, certain limitations apply to the payment of future dividends pursuant to Swiss law and our articles of association. See “Description of Share Capital and Articles of Association.” For the taxation of future dividend payments, see “Swiss Tax-Implications for U.S. Holders.” In addition, ordinary dividends may be paid only if our shareholders’ equity exceeds the sum of our paid-in and called-up share capital plus the statutory reserves required to be maintained by Swiss law or by our articles of association. Accordingly, investors cannot rely on dividend income (whether cash nor otherwise) from ADSs and any returns on an investment in the ADSs will likely depend entirely upon any future appreciation in the price of the ADSs.

You may not receive distributions on our ordinary shares represented by our ADS or any value for them if it is illegal or impractical to make them available to holders of ADSs.

We expect that the depositary for our ADSs will agree to pay to you or distribute the cash dividends or other distributions it or the custodian receives on our ordinary shares or other deposited securities after deducting its fees and expenses. You will receive these distributions in proportion to the number of our ordinary shares your ADSs represent. However, in accordance with the limitations that we expect will be set forth in the deposit agreement, it may be unlawful or impractical to make a distribution available to holders of ADSs. We have no obligation to take any other action to permit the distribution of our ADSs, ordinary shares, rights or anything else to holders of our ADSs. This means that you may not receive the distributions we make on our ordinary shares or any value from them if it is unlawful or impracticable to make them available to you. These restrictions may have a material adverse effect on the value of your ADSs.

Holders of our ordinary shares outside Switzerland and ADS holders may not be able to exercise subscription or preemptive rights.

Under Swiss law, shareholders may have certain subscription rights and preemptive rights to subscribe on a pro rata basis for issuance of equity or other securities that are convertible into equity. Due to laws and regulations in their respective jurisdictions, however, non-Swiss shareholders may not be able to exercise such rights unless we take action to register or otherwise qualify the rights offering under the laws of that jurisdiction. There can be no assurance that we would take any such action and we reserve the right to determine whether we should take such action in any jurisdiction. If shareholders in such jurisdictions were unable to exercise their subscription or pre-emptive rights, their ownership interest in the Company would be diluted.

ADS holders have no subscription or preemptive rights to subscribe to newly issued shares unless such rights are granted to the foreign depositary. The right to exercise such subscription and preemptive rights is set out in the agreement between the ADS holder and the depositary.

We are a Swiss corporation. The rights of our shareholders may be different from the rights of shareholders in companies governed by the laws of U.S. jurisdictions.

We are a Swiss corporation. Our corporate affairs are governed by our articles of association and organizational regulations and by the laws governing companies, including listed companies, incorporated in Switzerland. The rights of our shareholders and the responsibilities of members of our board of directors may be different from the rights and obligations of shareholders and directors of companies governed by the laws of U.S. jurisdictions. In the performance of its duties, our board of directors is required by Swiss law to consider the interests of our company, and may also have regard to the interests of our shareholders, our employees and other stakeholders, in all cases with due observation of the principles of reasonableness and fairness. It is possible that some of these parties will have interests that are different from, or in addition to, your interests as a holder of ADSs. Swiss corporate law limits the ability of our shareholders to challenge

 

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resolutions made or other actions taken by our board of directors in court. Our shareholders generally are not permitted to file a suit to reverse a decision or an action taken by our board of directors but are instead only permitted to seek damages for breaches of fiduciary duty. As a matter of Swiss law, shareholder claims against a member of our board of directors for breach of fiduciary duty would have to be brought to the competent courts in Geneva, Canton of Geneva, Switzerland, or where the relevant member of our board of directors is domiciled. In addition, under Swiss law, any claims by our shareholders against us must be brought exclusively to the competent courts in Geneva, Canton of Geneva, Switzerland

On June 19, 2020, the Swiss Parliament approved legislation that will modernize certain aspects of Swiss corporate law. See “Description of Share Capital and Articles of Association-Certain Important Provisions of our Articles of Association, Organizational Rules and Swiss Law.” The new legislation, which will alter the rights of shareholders under Swiss law, will come into force on January 1, 2023. There can be no assurance that Swiss law will not once again change in the future, which could adversely affect the rights of our shareholders or holders of our ADSs. Furthermore, there can be no guarantee that Swiss law does or will protect our shareholders or the holders of our ADSs in a similar fashion as the laws of U.S. jurisdictions would, in particular as regards corporate law principles, if we were a U.S.-incorporated company.

Claims of U.S. civil liabilities may not be enforceable against us.

We are incorporated under the laws of Switzerland and our registered office and domicile is located in Geneva, Switzerland. Substantially all of our assets are located outside the United States. Several our directors and executive officers are not residents of the United States. As a result, it may not be possible for investors to effect service of process within the United States upon such persons or to enforce judgments obtained against them or us in U.S. courts, including judgments predicated upon the civil liability provisions of the U.S. federal securities laws. We have been advised by our Swiss counsel that there is doubt as to the enforceability in Switzerland of original actions, or in actions for enforcement of judgments of U.S. courts, of civil liabilities to the extent solely predicated upon the federal and state securities laws of the United States. Original actions against persons in Switzerland based solely upon the U.S. federal or state securities laws are governed, among other things, by the principles set forth in the Swiss Federal Act on Private International Law.

The United States currently does not have a treaty with Switzerland providing for the reciprocal recognition and enforcement of judgments, other than arbitration awards, in civil and commercial matters. Consequently, a final judgment for payment given by a court in the United States, whether or not predicated solely upon U.S. securities laws, would not automatically be recognized or enforced in Switzerland. In order to obtain a judgment which is recognizable and enforceable in Switzerland, the party in whose favor a final and conclusive judgment of the U.S. court has been rendered will be required to file its claim with a court of competent jurisdiction in Switzerland which may refuse to enforce a final judgment rendered by the U.S. court for one of the reasons specified in the Swiss Federal Private International Law Act of December 18, 1987, as amended (“PILA”), in particular pursuant to art. 25—27 thereof. Enforcement may, according to such provisions, be refused, for instance, if the foreign court had no jurisdiction from a Swiss law point of view, for reasons of public policy, lack of possibility to defend, conflicting judgments, violation of fundamental principles of Swiss procedural law, especially that the Swiss company was denied the right to be heard, a lawsuit between the same parties and concerning the same cause of action had already been brought or decided in Switzerland or that the lawsuit had proceeded to judgment in a third State and that judgment can be recognized in Switzerland. Also, (i) the application of provisions of foreign law is excluded if such application leads to a result that is incompatible with Swiss public policy, (ii) mandatory provisions of Swiss law may be applicable regardless of any other law that would otherwise apply, and (iii) a Swiss court may find that provisions of a law other than the law chosen by the parties are applicable if important reasons call for such applicability and if the facts are closely linked to such other law. Swiss courts may deny the recognition and enforcement of punitive damages or other awards. Moreover, a Swiss court may reduce the amount of damages granted by a U.S. court and recognize damages only to the extent that they are necessary to compensate actual losses or damages. the non-Swiss court had jurisdiction pursuant to the Swiss Federal Act on Private International Law;

 

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Our status as a Swiss corporation means that our shareholders enjoy certain rights that may limit our flexibility to raise capital, issue dividends and otherwise manage ongoing capital needs.

Swiss law reserves for approval by shareholders certain corporate actions over which a board of directors would have authority in some other jurisdictions. For example, the payment of dividends and cancellation of treasury shares must be approved by shareholders. Swiss law also requires that our shareholders themselves resolve to, or authorize our board of directors to, increase our share capital. While our shareholders may authorize share capital that can be issued by our board of directors without additional shareholder approval, Swiss law limits this authorization to 50% of the share capital registered in the commercial register at the time of the authorization. The authorization, furthermore, has a limited duration of up to two years and must be renewed by the shareholders from time to time thereafter in order to be available for raising capital. Additionally, subject to specified exceptions, including exceptions explicitly described in our articles of association, Swiss law grants pre-emptive rights to existing shareholders to subscribe for new issuances of shares, which may be limited or withdrawn only under certain limited conditions. Swiss law also does not provide as much flexibility in the various rights and regulations that can attach to different categories of shares as do the laws of some other jurisdictions. These Swiss law requirements relating to our capital management may limit our flexibility, and situations may arise where greater flexibility would have provided benefits to our shareholders. See “Description of Share Capital and Articles of Association,” “Limitations Affecting Shareholders of a Swiss Company” and “Comparison of Shareholder Rights.”

We are a foreign private issuer and, as a result, we are not subject to U.S. proxy rules and are subject to Exchange Act reporting obligations that, to some extent, are more lenient and less frequent than those of a U.S. domestic public company.

We report under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as a non-U.S. company with foreign private issuer status. Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including (i) the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; (ii) the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and (iii) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K, upon the occurrence of specified significant events. In addition, foreign private issuers are not required to file their annual report on Form 20-F until 120 days after the end of each fiscal year, while U.S. domestic issuers that are accelerated filers are required to file their annual report on Form 10-K within 75 days after the end of each fiscal year. Foreign private issuers are also exempt from the Regulation Fair Disclosure, aimed at preventing issuers from making selective disclosures of material information. As a result of the above, you may not have the same protections afforded to shareholders of companies that are not foreign private issuers.

As a foreign private issuer and as permitted by the listing requirements of Nasdaq, we rely on certain home country governance practices rather than the corporate governance requirements of Nasdaq.

We are a foreign private issuer. As a result, in accordance with Nasdaq Listing Rule 5615(a)(3), if we are approved for listing, we will comply with home country governance requirements and certain exemptions thereunder rather than complying with certain of the corporate governance requirements of Nasdaq.

 

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Swiss law does not require that a majority of our board of directors consist of independent directors. Our board of directors therefore may include fewer independent directors than would be required if we were subject to Nasdaq Listing Rule 5605(b)(1). In addition, we are not subject to Nasdaq Listing Rule 5605(b)(2), which requires that independent directors regularly have scheduled meetings at which only independent directors are present.

Although Swiss law also requires that we adopt a compensation committee, we follow home country requirements with respect to such committee. As a result, our practice varies from the requirements of Nasdaq Listing Rule 5605(d), which sets forth certain requirements as to the responsibilities, composition and independence of compensation committees, and, from the independent director oversight of director nominations requirements of Nasdaq Listing Rule 5605(e).

Furthermore, in accordance with Swiss law and generally accepted business practices, our articles of association do not provide quorum requirements generally applicable to general meetings of shareholders. Our practice thus varies from the requirement of Nasdaq Listing Rule 5620(c), which requires an issuer to provide in its bylaws for a generally applicable quorum, and that such quorum may not be less than one-third of the outstanding voting stock.

For an overview of our corporate governance principles, see “Description of Share Capital and Articles of Association-Certain Important Provisions of our Articles of Association, Organizational Rules and Swiss Law.” As a result of the above, you may not have the same protections afforded to shareholders of companies that are not foreign private issuers.

We may lose our foreign private issuer status which would then require us to comply with the Exchange Act’s domestic reporting regime and cause us to incur significant legal, accounting and other expenses.

We are a foreign private issuer and therefore we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act applicable to U.S. domestic issuers. In order to maintain our current status as a foreign private issuer, either (a) a majority of our ordinary shares must be either directly or indirectly owned of record by non-residents of the U.S. or (b) (i) a majority of our executive officers or directors may not be U.S. citizens or residents, (ii) more than 50 percent of our assets cannot be located in the U.S. and (iii) our business must be administered principally outside the U.S. If we lost this status, we would be required to comply with the Exchange Act reporting and other requirements applicable to U.S. domestic issuers, which are more detailed and extensive than the requirements for foreign private issuers. We may also be required to make changes in our corporate governance practices in accordance with various SEC and stock exchange rules. The regulatory and compliance costs to us under U.S. securities laws if we are required to comply with the reporting requirements applicable to a U.S. domestic issuer may be significantly higher than the cost we would incur as a foreign private issuer. As a result, we expect that a loss of foreign private issuer status would increase our legal and financial compliance costs and would make some activities highly time-consuming and costly. We also expect that if we were required to comply with the rules and regulations applicable to U.S. domestic issuers, it would make it more difficult and expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These rules and regulations could also make it more difficult for us to attract and retain qualified members of our board of directors.

 

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We are an “emerging growth company,” and we cannot be certain if the reduced reporting requirements applicable to “emerging growth companies” will make the ADSs less attractive to investors.

We are an “emerging growth company,” as defined in the U.S. Jumpstart Our Business Startups Act of 2012, or the JOBS Act. For as long as we continue to be an “emerging growth company,” we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, exemptions from the requirements of holding a nonbinding advisory vote on executive compensation. As an “emerging growth company,” we are required to report only two years of financial results and selected financial data compared to three and five years, respectively, for comparable data reported by other public companies. We may take advantage of these exemptions until we are no longer an “emerging growth company.” We could be an “emerging growth company” for up to the last day of the fiscal year ending after the fifth anniversary of our initial U.S. public offering, although circumstances could cause us to lose that status earlier, including if the aggregate market value of our ordinary shares held by non-affiliates exceeds $700 million as of any June 30 (the end of our second fiscal quarter) before that time, in which case we would no longer be an “emerging growth company” as of the following December 31 (our fiscal year-end). We cannot predict if investors will find the ADSs less attractive because we may rely on these exemptions. If some investors find the ADSs less attractive as a result, there may be a less active trading market for the ADSs and the price of the ADSs may be more volatile.

If we are or become classified as a passive foreign investment company, U.S. holders of ADSs may suffer adverse tax consequences as a result.

Generally, for any taxable year, if at least 75% of our gross income is passive income, or at least 50% of the value of our assets is attributable to assets that produce passive income or are held for the production of passive income, including cash, we will be characterized as a passive foreign investment company, or PFIC, for U.S. federal income tax purposes. For purposes of these tests, passive income includes dividends, interest, gains from commodities and securities transactions, the excess of gains over losses from the disposition of assets which produce passive income (including amounts derived by reason of the temporary investment of funds raised in offerings of our shares or ADSs) and rents and royalties other than rents and royalties which are received from unrelated parties in connection with the active conduct of a trade or business. If we are characterized as a PFIC, U.S. holders of our ADSs may suffer adverse tax consequences, including having gains realized on the sale of our ADSs treated as ordinary income rather than capital gain, the loss of the preferential rate applicable to dividends received on ADSs by individuals who are U.S. holders, and having interest charges apply to certain distributions by us and gains from the sales of our ADSs.

Our status as a PFIC will depend on the nature and composition of our income and the nature, composition and value of our assets. Our status may also depend, in part, on how quickly we utilize the cash proceeds from this or any future offering of our ordinary shares or ADSs in our business. The tax consequences that would apply if we are classified as a PFIC would be different from those described above if a U.S. holder of ADSs were able to make a valid qualified electing fund, or QEF, election. At this time, we do not expect to provide U.S. holders of ADSs with the information necessary for a U.S. shareholder to make a QEF election. Accordingly, prospective investors should assume that a QEF election will not be available.

General Risks

We will incur increased costs as a result of operating as a U.S. public company, and our board of directors will be required to devote substantial time to new compliance initiatives and corporate governance practices.

As a public company in the United States, and particularly after we no longer qualify as an emerging growth company, we will incur significant legal, accounting and other expenses that we did not incur as a public company listed only on the SIX Swiss Exchange. We are a corporation (Société Anonyme), organized under the laws of Switzerland in accordance with articles 620 et seqq. of the Swiss Code of Obligations (Code des obligations) and subject to the listing rules and the applicable regulations for companies listed on the SIX Swiss Exchange, the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer

 

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Protection Act, the listing requirements of the Nasdaq Stock Market, or Nasdaq, and other applicable securities rules and regulations that impose various requirements on non-U.S. reporting public companies, including the establishment and maintenance of effective disclosure and financial controls and certain additional corporate governance practices. Our board of directors and other personnel will be required to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, we will be required to furnish a report on our internal control over financial reporting. However, while we remain an emerging growth company, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To achieve compliance with Section 404 within the prescribed period, we are engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that we will not be able to conclude, within the prescribed timeframe or at all, that our internal control over financial reporting is effective as required by Section 404. If we identify one or more material weaknesses, it could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, shareholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of ADSs representing our shares or our shares.

Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404 of the Sarbanes-Oxley Act, or any subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement. Inadequate internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of ADSs representing our shares or our shares.

Management will be required to assess the effectiveness of our internal controls annually beginning with our second annual report to be filed with the SEC. However, for as long as we are an “emerging growth company” under the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act. An independent assessment of the effectiveness of our internal controls could detect problems that our management’s assessment might not. Undetected material weaknesses in our internal controls could lead to financial statement restatements requiring us to incur the expense of remediation and could also result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

 

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Risks from the improper conduct of employees, agents, contractors, or collaborators could adversely affect our reputation and our business, prospects, operating results, and financial condition.

We cannot ensure that our compliance controls, policies, and procedures will in every instance protect us from acts committed by our employees, agents, contractors, or collaborators, which would violate the laws or regulations of the jurisdictions in which we operate, including, without limitation, healthcare, employment, foreign corrupt practices, environmental, competition, and patient privacy and other privacy laws and regulations. Such improper actions could subject us to civil or criminal investigations, and monetary and injunctive penalties, and could adversely impact our operating results, our ability to conduct business and our reputation.

We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with FDA or EMA regulations, to provide accurate information to the FDA or the EMA, or intentional failures to report financial information or data accurately or to disclose unauthorized activities to us. Employee misconduct could also involve the improper use of information obtained in the course of clinical studies, which could result in regulatory sanctions and serious harm to our reputation. While we take precautions to detect and prevent this activity, it may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions.

Our business activities may be subject to the Foreign Corrupt Practices Act (FCPA) and similar anti-bribery and anti-corruption laws.

Our business activities may be subject to the FCPA and similar anti-bribery or anti-corruption laws, regulations or rules of other countries in which we operate, including the UK Bribery Act. The FCPA generally prohibits offering, promising, giving or authorizing others to give anything of value, either directly or indirectly, to a non-U.S. government official in order to influence official action, or otherwise obtain or retain business. The FCPA also requires public companies to make and keep books and records that accurately and fairly reflect the transactions of the corporation, and to devise and maintain an adequate system of internal accounting controls. Our business is heavily regulated and therefore involves significant interaction with public officials. including officials of non-U.S. governments. Additionally, in many other countries, the healthcare providers who prescribe pharmaceuticals or biopharmaceuticals and the investigators who perform our studies are employed by their government, and the purchasers of pharmaceuticals are government entities; therefore, our dealings with these prescribers and purchasers are subject to regulation under the FCPA. The Securities and Exchange Commission (“SEC”) and the Department of Justice have increased their FCPA enforcement activities with respect to pharmaceutical companies. There is no certainty that all of our employees, agents, contractors or collaborators, or those of our affiliates, will comply with all applicable laws and regulations, particularly given the high level of complexity of these laws. Violations of these laws and regulations could result in fines, criminal sanctions against us, our officers or our employees, the closing down of our facilities, requirements to obtain export licenses, cessation of business activities in sanctioned countries, implementation of compliance programs, and prohibitions on the conduct of our business. Any such violations could include prohibitions on our ability to offer our products in one or more countries and could materially damage our reputation, our brand, our international expansion efforts, our ability to attract and retain employees, and our business, prospects, operating results and financial condition.

 

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A breakdown or breach of our information technology systems and cybersecurity efforts, or those of our key business partners or service providers, could subject us to liability or reputational damage or interrupt the operation of our business.

Despite the implementation of security measures, our internal computer systems and those of our contractors and consultants may be vulnerable to damage from computer viruses and unauthorized access. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs and our business operations. For example, the loss of clinical trial data from completed, ongoing or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Our ability to monitor our partners’ data security practices are limited, and due to applicable laws and regulations or contractual obligations, we may be held responsible for any security breaches or cybersecurity attack attributed to them as they relate to the information we share with them. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or systems, or inappropriate disclosure of confidential or proprietary information or personal data of our employees, partners or study subjects, we could incur liability and the further development and commercialization of our product candidates could be delayed.

We are increasingly dependent upon technology systems and data. Our computer systems continue to increase in multitude and complexity due to the growth in our business, making them potentially vulnerable to breakdown, malicious intrusion and random attack. Data privacy or security breaches, including those by individuals authorized to access our technology systems or others may pose a risk that sensitive data, including intellectual property, trade secrets or personal information belonging to us, our patients, study subjects or other business partners, may be exposed to unauthorized persons or to the public. Cyber-attacks are increasing in their frequency, sophistication and intensity, and are becoming increasingly difficult to detect. They are often carried out by motivated, well-resourced, skilled and persistent actors, including nation states, organized crime groups, “hacktivists” and employees or contractors acting with malicious intent. Cyber-attacks could include the deployment of harmful malware and key loggers, ransomware, a denial-of-service attack, a malicious website, phishing attacks, computer viruses, social engineering and other means to affect the confidentiality, integrity and availability of our technology systems and data. Our key business partners face similar risks and any security breach of their systems could adversely affect our security posture. Although we continue to build and improve our systems and infrastructure, and believe we have taken appropriate security measures to reduce these risks to our data and information technology systems, there can be no assurance that our efforts will prevent, detect or appropriately respond to breakdowns or breaches in our systems that could adversely affect our business and operations and/or result in the loss of critical or sensitive information, including personal information, which could result in financial, legal, business or reputational harm to us. We continue to invest in industry standard IS/IT solutions and managed services that often include the relevant, layered protection and monitoring practices surrounding our data and IT systems and related infrastructure. These investments reduce further these risks in that they enable organizations such as ours to leverage the resources necessary to monitor IT systems and infrastructure for any current or potential threats. These investments can be costly, and as cyber threats continue to evolve, we may be required to expend significant, additional resources to continue to modify and/or enhance our protective, detective and responsive measures required to remediate any identified information security vulnerabilities. Claims related to security breaches, cyber-attacks and other related breaches may result in significant fines, penalties and payment of damages. We may be required to expend significant capital and other resources to protect against and respond to any attempted or existing cybersecurity incidents. In addition, our remediation efforts may not be successful.

Changes in laws, rules or regulations relating to data privacy and security, or any actual or perceived failure by us to comply with such laws, rules, regulations and standards, or contractual or other obligations relating to data privacy and security, could have a material adverse effect on our reputation, results of operations, financial condition and cash flows.

We are, and may increasingly become, subject to various laws, rules, regulations and standards, as well as contractual obligations, relating to data privacy and security in the jurisdictions in which we operate. The regulatory environment related to data privacy and security is increasingly rigorous, with new and constantly changing requirements applicable to our business, and enforcement practices are likely to remain uncertain for the foreseeable future. These laws, rules, regulations and standards may be interpreted and applied differently over time and from jurisdiction to jurisdiction in a manner that could have a material

 

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adverse effect on our results of operations, financial condition and cash flows. New laws, amendments to or reinterpretations of existing laws, rules, regulations, standards and other obligations may require us to incur additional costs and restrict our business operations, and may require us to change how we use, collect, store, transfer or otherwise process certain types of personal information and to implement new processes to comply with those laws.

Evolving compliance and operational requirements impose significant costs, which are likely to increase over time. In addition, such requirements may require us to modify our data-processing practices and policies, distract management or divert resources from other initiatives and projects. For instance, the European Union (EU) Court of Justice and the Swiss Federal Data Protection and Information Commissioner have declared that the EU-U.S. Privacy Shield and the Swiss-U.S. Privacy Shield, respectively, do not provide for an adequate level of protection when transferring personal data from the EU to the U.S. respectively from Switzerland to the U.S. which could increase our compliance burden. If we are unable to properly protect the privacy and security of personal information, including protected health information, we could be found to have breached our contracts. In addition, any failure or perceived failure by us to comply with any applicable federal, state or similar foreign laws and regulations relating to data privacy and security could result in damage to our reputation and our relationship with our customers, as well as proceedings or litigation by governmental agencies, customers, partners, collaborators and/or study subjects, including class action privacy litigation in certain jurisdictions, which would subject us to significant fines, sanctions, awards, penalties or judgments, all of which could have a material adverse effect on our business, results of operations, financial condition and prospects.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This registration statement contains forward-looking statements that involve substantial risks and uncertainties. All statements contained in this registration statement, other than statements of historical fact, including statements regarding our strategy, future operations, future financial position, future revenues, projected costs, projects, plans and objections of management, are forward-looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “intend”, “may,” “plan,” “predict,” “project,” “target,” “potential,” “would,” “could,” “should,” “continue,” and other similar expressions are intended to identify forward-looking statements, though not all forward-looking statements contain these identifying words. The forward-looking statements in this registration statement include, among other things, statements about:

 

   

the success, cost and development of our clinical programs, including the progress of, and results from, our (and our partners’) clinical trial and preclinical programs for RLF-100 and ACER-001;

 

   

the ability of our collaboration partners to obtain authorizations to commercialize products that are the subject of the respective collaborations;

 

   

the outcome of our lawsuit against NeuroRx for breach of our collaboration agreement with NeuroRx;

 

   

our ability or our collaboration partners’ abilities to obtain and maintain regulatory approval of our product candidates and any related restrictions, limitations or warnings on the label of any such product, if approved;

 

   

our plans to pursue research and development of product candidates we may obtain in the future;

 

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our ability to compete with companies currently marketing or engaged in the development of treatments for indications that our product candidates are designed to target;

 

   

the potential advantages or disadvantages of our product candidates;

 

   

the rate and degree of market acceptance and clinical utility of our product candidates;

 

   

the success of our collaborations and partnerships with third parties;

 

   

our estimates regarding the potential market opportunities for our product candidates;

 

   

our sales, marketing, and distribution capabilities and strategy;

 

   

our ability to establish and maintain arrangements for the manufacture of our product candidates;

 

   

our ability to protect and defend our intellectual property;

 

   

whether any of our product candidates (or our collaboration partners’ product candidates) will ever be approved for commercialization;

 

   

whether we will ever achieve cash flow positive operations or profitability;

 

   

our expectations related to our use of capital;

 

   

the effect of the COVID-19 pandemic, including mitigation efforts and economic effects, on any of the foregoing or other aspects of our business operations, including, but not limited to our preclinical studies and clinical trials;

 

   

our estimates regarding expenses, future revenues, capital requirements and our needs for additional financing;

 

   

the impact of government laws and regulations; and

 

   

our competitive position.

You should refer to the section of this prospectus titled “Risk Factors” for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this prospectus will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. The Private Securities Litigation Reform Act of 1995 and Section 27A of the Securities Act do not protect any forward-looking statements that we make in connection with this offering.

You should read this prospectus and the documents that we reference in this prospectus and have filed with the SEC as exhibits to the registration statement of which this prospectus is a part with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

 

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MARKET, INDUSTRY AND OTHER DATA

This prospectus contains estimates, projections and other information concerning our industry, our business and the markets for our product candidates. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties, and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from our own internal estimates and research as well as from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources which we believe to be reliable.

In addition, assumptions and estimates of our and our industry’s future performance are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section titled “Risk Factors.” These and other factors could cause our future performance to differ materially from our assumptions and estimates. See “Special Note Regarding Forward-Looking Statements.”

TRADEMARKS AND SERVICE MARKS

We own trademarks for Relief Therapeutics in Switzerland. All other trade names, trademarks and service marks of other companies appearing in this Registration Statement on Form F-1 are the property of their respective holders. Solely for convenience, the trademarks and trade names in this Registration Statement on Form F-1 are referred to without the ® and  symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend to use or display other companies’ trademarks and trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

 

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USE OF PROCEEDS

We estimate that we will receive net proceeds from this offering of approximately $22.1 million (CHF 21.1 million), assuming a public offering price of $6.00 (CHF 5.57) per Unit, which is the midpoint of the price range set forth on the cover of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters exercise in full their options to purchase additional Units, we estimate that we will receive net proceeds from this offering of approximately $25.5 million (CHF 23.7 million), assuming a public offering price of $6.00 (CHF 5.57) per Unit, which is the midpoint of the price range set forth on the cover of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

Each $1.00 (CHF 0.93) increase (decrease) in the assumed offering price of $6.00 (CHF 5.57) per Unit, which is the midpoint of the price range set forth on the cover of this prospectus, would increase or decrease our net proceeds from the offering by $4.17 million (CHF $3.86 million), assuming the number of ADSs offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions. We may also increase or decrease the number of Units we are offering. An increase or decrease of 10,000 Units offered by us would increase or decrease the net proceeds to us from the sale of the Units we are offering by $60,000 (CHF 55,602), assuming that the assumed offering price remains the same and after deducting underwriting discounts and commissions. The actual net proceeds payable to us will adjust based on the actual number of Units offered by us, the actual offering price and other terms of the offering determined at pricing.

We currently expect to use the net proceeds from this offering, together with our existing cash and cash equivalents of $21.5 million (CHF 19.9 million) for working capital and other general corporate purposes.

We currently have no specific plans as to how the net proceeds from this offering will be allocated beyond the expected uses specified above and therefore management will retain discretion with respect to the use of the remainder of the net proceeds of this offering. We may also use a portion of the net proceeds to acquire, license or invest in complementary products, technologies or businesses; however, we currently have no agreements, plans or commitments to complete any such transaction.

This expected use of the net proceeds from this offering represents our intentions based upon our current plans and business conditions. As of the date of this prospectus, we cannot predict with certainty all of the particular uses for the net proceeds to be received upon the completion of this offering or the amounts that we will actually spend on the uses set forth above. The amounts and timing of our actual expenditures and the extent of clinical development may vary significantly depending on numerous factors, including the progress of our development efforts, the status of and results from preclinical studies and any ongoing clinical trials or clinical trials that we may commence in the future, as well as any collaboration that we may enter into with third parties for our product candidates and any unforeseen cash needs. As a result, our future financing needs remain uncertain and our management will retain broad discretion over the allocation of the net proceeds from this offering.

 

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Pending our use of the net proceeds from this offering, we intend to invest the net proceeds in a variety of capital preservation investments, including term deposits, short-term, investment-grade, interest-bearing instruments and government securities.

DIVIDEND POLICY

We have not paid any dividends since our incorporation. Even if future operations lead to significant levels of distributable profits, we currently intend that any earnings will be reinvested in our business and that dividends will not be paid until we have an established revenue stream to support continuing dividends. Under our articles of association, the declaration of dividends requires a resolution passed by a simple majority of the votes cast at a shareholders’ meeting regardless of abstentions and empty or invalid votes. The proposal to pay future dividends to shareholders will in addition effectively be at the discretion of our board of directors after considering various factors including our business prospects, liquidity requirements, financial performance and new product development. In addition, payment of future dividends is subject to certain limitation pursuant to Swiss law or by our articles of association. Accordingly, investors cannot rely on dividend income from our ordinary shares and any returns on an investment in our ordinary shares will likely depend entirely upon any future appreciation in the price of our ordinary shares.

The proposal to pay future dividends to shareholders will effectively be at the discretion of our board of directors and subject to approval by, at their discretion, our shareholders after considering various factors including our business prospects, liquidity requirements, financial performance and new product development.

In addition, payment of future dividends is subject to certain limitations pursuant to Swiss law or our articles of association. Investors cannot rely on dividend income from our ordinary shares and any returns on an investment in our ordinary shares will likely depend entirely upon any future appreciation in the price of our ordinary shares. Dividends paid on our ordinary shares are subject to Swiss Federal withholding tax, except if paid out of reserves from capital contributions (apports de capital).

A distribution of cash or property that is based on a reduction of our share capital requires a special audit report confirming that the claims of our creditors remain fully covered by our assets despite the reduction in the share capital recorded in the commercial register. Upon approval by the general meeting of the shareholders of the capital reduction, our board of directors must give public notice of the capital reduction in the Swiss Official Gazette of Commerce three times and notify our creditors that they may request, within two months of the third publication, satisfaction of or security for their claims. Distributions of cash or property that are based upon a capital reduction are not subject to Swiss federal withholding tax. See “Swiss Tax Implications for U.S. Holders-Swiss Tax Considerations-Swiss Federal Withholding Tax” for a summary of certain Swiss tax consequences regarding distributions paid on the ordinary shares that are based upon a capital reduction. For a description of share capital reductions under the revised Swiss corporate law expected to enter into force in 2023, see “Description of Share Capital and Articles of Association-Dividends and Other Distributions.”

Dividend distributions, if any in the future, will be declared and paid in Swiss francs and converted into U.S. dollars with respect to the ADSs, as provided in the deposit agreement.

Our board of directors determines the date on which the dividend entitlement starts. Dividends are usually due and payable shortly after the shareholders have passed the resolution approving the payment, but shareholders may also resolve at the ordinary general meeting of shareholders to pay dividends in quarterly or other installments.

 

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For a discussion of the taxation of dividends, see the section in this prospectus entitled “Taxation-Swiss Federal Withholding Tax.”

CAPITALIZATION

The table below sets forth our cash and cash equivalents and shows our capitalization as of June 30, 2022. You should read this table in conjunction with our financial statements included in this registration statement, together with the accompanying notes and the other information appearing in the audited financial statements included in this registration statement. All amounts below are in Swiss Francs (CHF) and are in thousands. The indebtedness set forth below is unsecured and non-guaranteed.

 

(in thousands, except per-share data)    June 30, 2022  

Cash and Cash Equivalents

     29,871  
  

 

 

 

Debt

  

Interest bearing loans and borrowings

     1,662  
  

 

 

 

Capitalization

  

Share Capital

     44,163  

Treasury Shares

     (2,235

Reserves

     215,747  

Accumulated deficit

     (96,251
  

 

 

 

Total Capitalization

     161,424  
  

 

 

 

Total Capitalization and Indebtedness

     163,086  
  

 

 

 

As of June 30, 2022, 4,192,840,785 of our ordinary shares were outstanding, excluding 223,493,832 shares that were held in treasury.

As of December 19, 2022, our cash and cash equivalents were approximately CHF 19.9 million and 4,402,475,099 of our ordinary shares were outstanding, excluding 1,213,859,518 shares that were held in treasury.

 

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DILUTION

If you invest in our Units in this offering, your ownership interest will be diluted to the extent of the difference between the public offering price per ADS in this offering and the as adjusted net tangible book value per ADS after this offering, in addition to any future dilution that may occur as a result of the future exercise of the warrants. Our net tangible book value as of June 30, 2022 was $22.7 Million (or $(1.08) per ADS). Net tangible book value per common share was determined by dividing our total assets less our intangible assets and our total liabilities by the number of ordinary shares outstanding as of June 30, 2022, and excludes 72,813,197 ordinary shares issuable upon the exercise of options at a weighted average price of CHF 0.062 ($0.067) per common share granted to our employees and directors but not exercised as of June 30, 2022.

After giving effect to the receipt of the estimated net proceeds from our sale of Units in the offering, assuming a public offering price of $6.00 (CHF 5.53) per Unit, which is the midpoint of the price range set forth on the cover of this prospectus, and the application of the estimated net proceeds therefrom as described under “Use of Proceeds,” our as adjusted net tangible book value at June 30, 2022 would have been approximately $(0.02) per ADS. This represents an immediate increase in net tangible book value per ADS of $1.06 to existing shareholders and an immediate dilution in net tangible book value per ADS of $6.02 to you.

The following table illustrates this dilution on an per-ADS basis.

 

Assumed public offering price per Unit

      $  6.00  

Net tangible book value per ADS as of June 30, 2022

   $ (1.08   

Increase in net tangible book value per ADS attributable to new investors

   $ 1.06     
  

 

 

    

As adjusted net tangible book value per ADS after this offering

      $ 0.02  
     

 

 

 

Dilution per ADS to new investors

      $ 6.02  

The dilution information discussed above is illustrative only and will change based on the actual offering price and other terms of the offering determined at pricing. Each $1.00 (CHF 0.93) increase or decrease in the assumed offering price of $6.00 (CHF 5.53) per Unit, which is the midpoint of the price range set forth on the cover of this prospectus, would increase or decrease our as adjusted net tangible book value by approximately $0.15 per ADS, and the dilution to new investors participating in the offering would be approximately $.80 per ADS, assuming that the number of Units offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting underwriting discounts and commissions. We may also increase or decrease the number of Units we are offering. An increase of 10,000 Units offered by us would increase the as adjusted net tangible book value by approximately $(0.2) per ADS, which is the midpoint of the price range set forth on the cover of this prospectus, and the dilution to new investors participating in the offering would be $6.00 per ADS, assuming that the assumed offering price remains the same, and after deducting underwriting discounts and commissions. Similarly, a decrease of 10,000 Units offered by us would decrease the as adjusted net tangible book value by approximately $0.03 per ADS, and the dilution to new investors participating in the offering would be $6.05 per ADS, assuming that the assumed offering price remains the same, and after deducting underwriting discounts and commissions. The as adjusted information discussed above is illustrative only and will be adjusted based on the actual offering price, the actual number of Units offered by us, and other terms of the offering determined at pricing.

If the underwriters exercise their option to purchase additional Units in full, the as adjusted net tangible book value per share after the offering would be $0.18 per ADS, the increase in the as adjusted net tangible book value to existing shareholders would be $1.18 per ADS, and the dilution to new investors participating in the offering would be $5.89 per ADS.

 

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The following table sets forth, as of , 2022, consideration paid to us in cash for ordinary shares purchased from us by our existing shareholders and by new investors participating in this offering (including ordinary shares represented by ADSs), based on an assumed offering price of $6.00 (CHF 5.53) per Unit, which is the midpoint of the price range set forth on the cover of this prospectus, and before deducting underwriting discounts and commissions and estimated offering expenses payable by us:

 

     ADSs Purchased   Total Consideration    
     Number      Percent   Amount    Percent   Average price
per ADS

Existing investors

        CHF      CHF

New investors

            

Total

      100.0%   CHF    100.0%  

Each $1.00 (CHF 0.93) increase or decrease in the assumed offering price of $6.00 (CHF 5.53) per Unit, which is the midpoint of the price range set forth on the cover of this prospectus, would increase or decrease the total consideration paid by new investors participating in the offering by $4.17 million (CHF 3.86 million), assuming that the number of ADSs offered by us, as set forth on the cover page of the prospectus, remains the same and before deducting underwriting discounts and commissions. We may also increase or decrease the number of ADSs we are offering. An increase or decrease in 10,000 Units offered by us would increase or decrease the total consideration paid by new investors participating in the offering by $60,000 (CHF 55,602), assuming that the assumed offering price remains the same and before deducting underwriting discounts and commissions. The as adjusted information discussed above is illustrative only and will be adjusted based on the actual offering price, the actual number of Units offered by us and other terms of the offering determined at pricing.

In addition, if the underwriters exercise their option to purchase additional ADSs in full, the number of shares held by the existing shareholders after this offering would be reduced to , or % of the total number of ordinary shares (including ordinary shares represented by ADSs) outstanding after this offering, and the number of shares held by new investors participating in this offering (including ordinary shares represented by ADSs) would increase to , or % of the total number of ordinary shares outstanding after this offering (including ordinary shares represented by ADSs).

The number of ordinary shares to be outstanding under this offering is based on a total of 4,416,334,617 ordinary shares outstanding as of June 30, 2022, excluding:

 

   

223,493,832 shares held in treasury; and

 

   

72,813,197 unvested stock options at a weighted average exercise price of CHF 0.062 per share.

 

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SELECTED FINANCIAL DATA

Relief Financial Information

We derived the selected consolidated financial data as of and for the years ended December 31, 2021 and 2020 from our audited consolidated financial statements included elsewhere in this registration statement. We have derived the selected consolidated financial data as of and for the six months ended June 30, 2022 and 2021 from our unaudited condensed consolidated financial statements included elsewhere in this registration statement. The unaudited condensed consolidated financial statements have been prepared on the same recognition and measurement basis as the audited financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to state fairly our balance sheet data at June 30, 2022 and our results of operations for the six months ended June 30, 2022 and 2021. We present our consolidated financial statements in accordance with International Financial Reporting Standards (“IFRS”), as promulgated by the International Accounting Standards Board (“IASB”). All amounts below are in Swiss Francs (CHF) and are in thousands.

The summary consolidated financial data below should be read together with those consolidated financial statements. Our historical results for any prior period are not necessarily indicative of results to be expected in any future period, and our interim period results are not necessarily indicative of results to be expected for a full year or any other interim period.

 

     December 31,      June 30,  

Statement of Operations Data

   2021      2020      2022      2021  

Revenue

     3,321        —          3,242        —    

Other gains

     1,171        273        1,303        891  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Income

     4,492        273        4,545        891  

Raw materials and consumables expense

     (750      —          (669      —    

External selling and distribution expense

     (365      —          (465      —    

External research and development expense

     (19,024      (13,672      (10,637      (8,307

Personnel expense

     (9,121      (2,627      (5,767      (3,439

Other administrative expense

     (6,750      (2,999      (3,963      (3,204

Other losses

     (752      (1,260      —          (458
  

 

 

    

 

 

    

 

 

    

 

 

 

EBITDA

     (32,270      (20,285      (16,956      (14,517

Reversal of impairment losses on intangible assets

     —          11,200        —          —    

Impairment expense

     —          —          (8,226      —    

Amortization and depreciation expense

     (2,036      —          (2,033      —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating loss

     (34,306      (9,085      (27,215      (14,517

Gain from disposal of a subsidiary

     —          3,382        —          —    

Financial income

     97        7        162        127  

Financial expense

     (1,316      (565      (1,056      (277
  

 

 

    

 

 

    

 

 

    

 

 

 

Result before income taxes

     (35,525      (6,261      (28,109      (14,667

Income taxes

     820        (1,567      1,609        (11
  

 

 

    

 

 

    

 

 

    

 

 

 

Results for the period

     (34,705      (7,828      (26,500      (14,678
  

 

 

    

 

 

    

 

 

    

 

 

 

 

Balance Sheet Data

   December 31, 2021      June 30, 2022  

Current Assets

     54,970        34,985  

Total Assets

     251,618        221,829  

Equity

     181,530        161,424  

Non-Current Liabilities

     50,355        47,923  

Current Liabilities

     19,733        12,482  

Total Equity and Liabilities

     251,618        221,829  

 

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The following tables, which have been derived from APR’s audited financial statements for the year ended December 31, 2020 summarizes the result of APR’s operations for the period indicated, in TCHF.

 

In TCHF

   Fiscal Year
Ended

December 31,
2020
 

Statement of Operations Data:

  

Revenue

     10,100  

Other gains

     3,943  
  

 

 

 

Total income

     14,043  

Goods and service expense

     (6,069

Personnel expense

     (4,809

Net impairment losses on financial and contract assets

     (657

General and administrative expense

     (1,019

Operating result

     1,489  

Depreciation and amortization expense

     (1,053

Profit before interest and taxes

     436  

Financial income and expense, net

     (327

Profit before income taxes

     109  

Income taxes

     (315
  

 

 

 

Loss for the year

     (206
  

 

 

 

Summary Unaudited Pro Forma Financial Information of Relief and APR

The unaudited pro forma condensed combined balance sheet data assume that the acquisition of APR was consummated on January 1, 2021 instead of its actual date (June 28, 2021) and combines the historical results of Relief and APR for the six months ended June 30, 2021 (as to APR) and the year ended December 31, 2021 (as to Relief). The historical financial statements of Relief and APR, which are provided elsewhere in this registration statement on Form F-1, have been adjusted to give pro forma effect to events that are (i) directly attributable to the acquisition, (ii) factually supportable, and (iii) with respect to the statements of operations, expected to have a continuing impact on the combined results. All amounts below are in Swiss Francs (CHF) and are in thousands.

 

Statement of Operations Data    December 31, 2021  

Revenue

     6,911  

Other gains

     1,183  
  

 

 

 

Total income

     8,094  

Raw materials and consumables expense

     (1,501

External selling and distribution expense

     (559

External research and development expense

     (19,765

Personnel expense

     (12,053

Other administrative expense

     (7,064

Other losses

     (752

Net impairment reversal gain on financial and contract assets

     (117
  

 

 

 

EBITDA

     (33,483

Amortization and depreciation expense

     (4,079
  

 

 

 

Operating result

     (37,562

Financial income

     166  

Financial expense

     (1,411
  

 

 

 

Net result before taxes

     (38,807

Income taxes

     1,126  
  

 

 

 

Net result for the period

     (37,681
  

 

 

 

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

We are a Swiss, commercial-stage biopharmaceutical company identifying, developing and commercializing novel, patent protected products in selected specialty, rare and ultra-rare disease areas on a global basis.

We currently focus on three therapeutic areas where we can best leverage our internal know-how and assets: Rare Metabolic Disorders, Rare Skin Diseases and Rare Respiratory Diseases. We are developing a direct commercial footprint in the United States (U.S.) and have a direct commercial footprint in Europe (EU), coupled with a strong network of commercial partners in the other major territories.

We leverage our internal R&D laboratories and track record in drug delivery systems and technologies to identify and take to market reformulated and/or repurposed drugs with a history of proven human safety and efficacy using a lean and capital efficient organization where all key strategic functions are internalized, combined with an optimized network of outsourced service providers for various development activities.

Our products and product candidates are intended for patients and care givers dealing with specialty, rare and ultra-rare debilitating diseases, by offering them novel treatment options engineered with patented drug delivery systems or repurposed and optimized drugs, to help them live their best possible lives and achieve their full potential.

We are led by a proven and seasoned management team of business leaders with significant experience in discovering, developing and commercializing important new medicines, delivering them to market and maximizing shareholder value. Collectively, the members of our management team have overseen research and development of products supporting regulatory approvals as well as commercial launches of marketed products.

Our diversified portfolio comprises a rare disease product that is commercialized in Europe and that we launched in the U.S. in the last quarter of 2022, as well as a pipeline of products at various stages of development and focused on rare and specialty diseases in selected therapeutic areas. In addition, the Company is commercializing several legacy products via licensing and distribution partners

We are actively pursuing a strategy to diversify our portfolio and are continuously evaluating in-licensing and partnering opportunities. To bring assets to the market as quickly as possible, we are seeking partnerships with, or acquisitions of, companies that have late-stage clinical molecules with a strong human safety profile, allowing for relatively short, capital-efficient clinical trials with clear endpoints. Our focus on rare diseases with significant unmet medical need allows us to maintain a lean organization, with a strong, experienced leadership able to deliver growth by effectively managing partnerships and efficiently allocating capital across the portfolio.

In March 2021, we signed a Collaboration and License Agreement with Acer Therapeutics, Inc. (“Acer”) for the worldwide development and commercialization of ACER-001 for the treatment of Urea Cycle Disorders (“UCDs”) and Maple Syrup Urine Disease (“MSUD”). ACER-001 is a proprietary powder formulation of sodium phenylbutyrate (NaPB) designed to be both taste-masked and immediate release.

In August 2021, Acer submitted an NDA for ACER-001 to the FDA for use as a treatment of UCD, which submission was accepted for filing in November 2021 with a PDUFA decision date of June 5, 2022.

 

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However, on or about the PDUFA decision date, Acer received a complete response letter stating that a satisfactory inspection of Acer’s third-party contract manufacturer would be required before its NDA for ACER-001 could be approved. Acer has now resubmitted its NDA, which has been accepted for filing with a January 15, 2023 PDUFA target date. Further, Acer has recently filed an IND to investigate ACER-001 for the treatment of Maple Syrup Urine Disease.

Assuming Acer’s NDA for ACER-001 for the treatment of UCD is approved, Relief, in accordance with its collaboration agreement with Acer, plans to apply for marketing authorization for this product to European and U.K. regulatory authorities. There can be no assurance, however that ACER-001 will be approved for commercialization in the U.K. or the EU.

In June 2021, we signed and closed a definitive agreement to acquire all outstanding shares of APR Applied Pharma Research SA (“APR”), a privately held Swiss pharmaceutical company with over 25 years’ experience in identifying, developing and commercializing known molecules engineered with drug delivery systems in niche and rare diseases on a global basis.

On March 15, 2022, we signed a binding term sheet with Meta Healthcare Ltd. (“Meta”), our United Kingdom distribution partner for GOLIKE, to acquire the worldwide commercialization rights, except in the United Kingdom, for a novel dosage form of a prescription drug already approved by the FDA and intended for the treatment of patients with PKU. At this time, we plan to file an IND for the novel dosage form in the U.S. as soon as possible and to file for FDA regulatory approval in the first quarter of 2023 and a filing of the 505(b)(2) NDA before the end of 2023. Additionally, Meta has submitted a patent application in the United Kingdom and we intend to seek a patent extension in all major territories including the U.S. and Europe.

Further, in July 2021, Relief acquired AdVita Lifescience GmbH (“AdVita”), a Germany-based privately held pharmaceutical company developing products for the treatment and diagnosis of rare lung diseases. Relief believes that AdVita’s capabilities will help the Company to further progress the development of RLF-100® for a range of lung diseases.

Previously, Relief had partnered with NeuroRx, Inc. (“NeuroRx” to seek to develop RLF-100® for the treatment of COVID-19. In March 2020, at the beginning of the first wave of the pandemic in the United States, NeuroRx submitted an Investigational New Drug (“IND”) application to the FDA for a phase 2b/3 trial of RLF-100 for the intravenous (“IV”) treatment of patients with critical COVID-19 respiratory failure. Within 24 hours, the FDA issued a “Study May Proceed” letter and the first patients were subsequently treated in April 2020 at Thomas Jefferson University Hospital in Philadelphia.

In September 2020, Relief entered into a binding collaboration agreement with NeuroRx (the “Collaboration Agreement”). The Collaboration Agreement established the terms under which we and NeuroRx collaborate and assist each other to maximize the revenues in our respective territories from the sale of aviptadil for intravenous and inhale use primarily for the treatment of COVID-19 related conditions. The collaboration agreement provided that NeuroRx would be responsible for developing and commercializing the product in the United States, Canada and Israel and that Relief would be responsible for developing and commercializing the product in the European Union, Switzerland, Iceland, Norway, the United Kingdom, the Channel Islands, Lichtenstein, Monaco, Andorra, San Marino and Vatican City. The collaboration agreement also provided that it would be conducted on an exclusive basis and that neither party could develop or commercialize any product competitive with RLF-100.

 

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In late 2020 and into early 2021, NeuroRx conducted a phase 2b/3 trial of intravenous aviptadil to evaluate its use in the treatment of respiratory failure due to COVID-19. In March 2021, NeuroRx reported the results of that trial. In its press release reporting those results, NeuroRx reported that across all patients and sites RLF-100 IV met the primary endpoint for successful recovery from respiratory failure at days 28 (p=0.14) and 60 (p=0.13) and also demonstrated a meaningful benefit in survival after controlling for ventilation status and treatment site. However, they also reported that the trial did not demonstrate a statistically-significant difference on the study’s primary endpoint without statistical adjustment for these pre-specified covariates. On the basis of these findings, NeuroRx announced on June 1, 2021 that it had applied to the FDA for Emergency Use Authorization (“EUA”) and that it planned to submit a New Drug Application with the FDA. Also in March 2021, NeuroRx announced that RLF-100 had been selected for inclusion in “TESICO” (Therapeutics for Severely Ill Inpatients with COVID-19), a phase 3 multicenter clinical trial that will include sites in the United States and multiple foreign countries, that is being sponsored by the U.S. National Institutes of Health (“NIH”).

While we have received a phase 2b/3 Study Report summary from NeuroRx, NeuroRx has refused to share the full clinical trial data with us, which has prevented us from moving forward to seek approval for the product in its territories. Further, on November 5, 2021, NRx announced that the FDA had declined NeuroRx’s application for EUA of IV aviptadil for the treatment of acute respiratory failure due to critical COVID-19. Subsequent applications filed by NeuroRx with the FDA seeking EUA for more limited use of the product for the treatment of COVID-19 and for breakthrough therapy designation for the product were also denied in the first half of 2022. Finally, in May 2022, Relief learned that the TESICO/Active 3b trial evaluating aviptadil for the treatment of COVID-19 had been discontinued by its Data Safety Monitoring Board based on futility.

Based on numerous breaches of the Collaboration Agreement by NeuroRx, in October 2021, we filed a lawsuit against NeuroRx and its then CEO, Dr. Jonathan Javitt, for multiple breaches of the Collaboration Agreement. The complaint was filed in the Supreme Court of the State of New York in Manhattan. The complaint alleged that the defendants are in breach of numerous provisions of the Collaboration Agreement. The complaint, among other remedies, sought damages, an order compelling defendants to comply with multiple provisions of the Collaboration Agreement, and a declaration directing NeuroRx to deliver the entire data set from the Phase 2b/3 clinical trial of intravenously-administering aviptadil to Relief. On January 10, 2022, NeuroRx filed a complaint against Relief alleging that we are in breach of the Collaboration Agreement and had thus repudiated and cancelled the Collaboration Agreement. Additionally, NeuroRx’s claims included a count for defamation.

On August 22, 2022, Relief and NRx issued a press release announcing that they had agreed to a tentative settlement of the pending litigation. The parties announced that they had agreed to work collaboratively to finalize the settlement within the next thirty days. Further, the parties announced that they had agreed to stay the litigation for an additional sixty days to allow for the negotiation and execution of the definitive settlement agreement and related terms. This litigation stay was later extended to November 11, 2022.

On November 14, 2022, Relief and NRx issued a press release announcing that the parties had entered into a definitive settlement agreement to resolve all matters relating to the pending litigation. As the closing at this settlement, held on December 19, 2022, (i) NRx transferred to Relief all of the assets that it previously used in its aviptadil development program, including its regulatory filings, patent applications, clinical data, and the formulation of the aviptadil product it was previously developing, (ii) Relief has the exclusive right and control going forward to develop and commercialize an aviptadil product, (iii) Relief has agreed to use commercially reasonable efforts to continue the existing Right to Try Program for aviptadil in the United States for at least 2 years, (iv) Relief will pay NRx milestone payments if it can successfully obtain commercial approval of an aviptadil product (whether for COVID-19 or any other indication), (v) Relief will pay NRx royalties based on a percentage of future sales of an aviptadil product (whether for COVID-19 or any other indication), up to a maximum of $30 million in the aggregate, (vi) NRx Pharmaceuticals has agreed not to compete in the development of an aviptadil product in the future, and (vii) Relief and NRx Pharmaceuticals have dismissed their pending litigation.

On November 24, 2021, we announced that we had entered into a collaboration agreement with InveniAI LLC (“InveniAI”), a U.S. based company that has pioneered the application of artificial intelligence and machine learning across biopharma and other industries, in order to identify promising drug candidates to treat rare and specialty diseases (the “InveniAI Collaboration Agreement”).Under the terms of the InveniAI Collaboration Agreement, InveniAI will use its proprietary platform for the identification of potential pharmaceutical product opportunities using its Pharma Big Innovation Data Lab, consisting of (i) its proprietary AlphaMeld platform, a cloud-based artificial intelligence platform that uses its proprietary machine learning and deep learning based neural networks to identify product opportunities in therapeutic areas, (ii) its cross-functional teams at its Integrated Center of Excellence, and (iii) domain expertise, to generate novel pharmaceutical opportunities and the related development pathway for the development of such concepts.

Under the terms of the InveniAI Collaboration Agreement, we paid InveniAI an initial up-front fee of $500,000. We will be required to pay success milestones for any products brought to us in connection with the InveniAI Collaboration Agreement ranging from $200,000 per product candidate for which we exercise our option to acquire IP rights to $50 million for any required product reaching $1 billion per year in net sales. We will also be required to pay royalties on any such commercialized product in certain countries a royalty of approximately 3%.

We are not currently developing any product brought to us by InveniAI, and there can be no assurance that our collaboration with InveniAI will result in the development of new product candidates or product concepts.

 

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Comparison of the Years Ended December 31, 2021 and 2020

Revenue

 

(in TCHF)    2021      2020      Change  

Revenue

     3,321        —          3,321  

Other gains

     1,171        273        898  
  

 

 

    

 

 

    

 

 

 

Total revenue

     4,492        273        4,219  

Revenue for 2021 was approximately CHF 3.32 million. Relief began generating revenue as a result of the business combination with APR at the end of June 2021, which generated net sales of approximately CHF 3.2 million in the six-month period from July 1, 2021 to December 31, 2021. In addition, revenue of CHF 0.1 million was derived from the sale of aviptadil by AdVita following its acquisition by Relief on July 28, 2021. Prior to these acquisitions, Relief had no revenues from product sales.

Other gains increased from approximately CHF 273,000 in 2020 to approximately CHF 1.17 million in 2021. These gains related mainly to nonrecurring write-offs of liabilities.

APR generated revenue from sales, licensing fees, and royalties of approximately CHF 10.1 million in 2020, while APR’s combined pre- and post-acquisition revenue in 2021 was approximately CHF 6.8 million.

As disclosed elsewhere in this registration statement, APR’s 2021 annualized sales were less than its reported 2020 annual sales. In 2020, as indicated in note 19 of the accounts of APR for the fiscal year ended December 31, 2020, APR divested an exclusive license for the commercialization of Ondansetron RF in some of its territories. Such license accounted for approximately CHF 2.1 million in product sales in 2020 (0 in 2021). Ondansetron RF remains, however, commercialized by APR and its commercialization partners in other territories and accounts for approximately CHF 300,000 in annual revenue. Additionally, several of APR’s products are at the end of their life cycle. While there can be no assurance, the recently marketed product GOLIKE, the nasal spray Sentinox, and the intended growth of development services provided to 3rd parties are expected to reverse the downward trend in the coming years.

Service expense

 

(in TCHF)    2021      2020      Change  

Raw materials and consumables expense

     750        —          750  

External selling and distribution expense

     365        —          365  

Third-party research and development expense

     19,024        13,672        5,352  
  

 

 

    

 

 

    

 

 

 

Total service expense

     20,139        13,672        6,467  
  

 

 

    

 

 

    

 

 

 

Raw materials, consumables, selling and distribution expenses were incurred from July 1, 2021, with the acquisition of APR and AdVita and their respective selling activities. Our third-party research and development expenses for 2021 were approximately CHF 20.1 million, an increase of approximately 47.3% compared to CHF 13.7 million in 2020, and were primarily related to the development expenses incurred by Acer under the license and collaboration agreement and to the clinical development of RLF-100 (aviptadil). In 2020, third-party research and development expenses were primarily constituted by services provided by our collaboration partner, NeuroRx and other third parties in relation to clinical trials for RLF-100 in COVID-19 induced ARDS.

 

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Personnel

 

(in TCHF)    2021      2020      Change  

Salaries, including social security expense

     4,485        76        4,409  
  

 

 

    

 

 

    

 

 

 

Independent contractor fees

     2,200        761        1,439  

Share-based payment expense

     1,143        1,048        95  

Social security expense in relation to share-based payments

     30        742        742  

Service cost for other benefit obligations

     1,243        —          1,243  
  

 

 

    

 

 

    

 

 

 

Total personnel expense

     9,101        2,627        6,474  
  

 

 

    

 

 

    

 

 

 

Personnel expenses increased from CHF 2.6 million to CHF 9.1 million. The business combinations with APR and AdVita increased the number of full-time equivalents and consultants from a dozen to six dozen, before organizational adjustments realized in the fourth quarter of 2021. As of December 31, 2021, the Group employed 55 full time equivalents and consultants.

Other administrative expenses

 

(in TCHF)    2021      2020      Change  

Professional services

     6,022        2,774        3,248  

Capital tax

     180        161        19  

Other administrative expense

     548        64        484  
  

 

 

    

 

 

    

 

 

 

Total administrative expense

     6,750        2,999        3,751  
  

 

 

    

 

 

    

 

 

 

Our administrative expenses were approximately CHF 6.8 million in 2021, an increase of approximately 125.0% over 2020. The increase in 2021 was primarily attributable to our expanded activities with the addition of APR and AdVita, as well as to legal and consulting service needs to support our operations and development plans.

Other Losses

Our other losses for 2021 were approximately CHF 0.8 million and were primarily constituted by impairment losses on loans to third parties. In 2020, other losses amounted to CHF 1.26 million , of which CHF 1.2 million related to realized and unrealized valuation losses on the 757,933 shares of Sonnet BioTherapeutics Holdings, Inc. we had received in April 2020 as consideration for the sale of our subsidiary Relief Therapeutics SA.

Reversal of impairment losses on intangible assets

 

(in TCHF)    2021      2020  

Reversal of impairment losses on intangible assets

     —          11,200  

In 2020, we reversed the impairment recognized on our aviptadil asset in prior years for CHF 11.2 million. The impairment charge had entirely been recognized in 2019 as a result of the annual impairment test. Assumptions used in the valuation model assessing the recoverable value of the asset at December 31, 2019 did not consider the emergence of COVID-19 and our plan to develop aviptadil for the treatment of COVID-19. As our decision to pursue this development was taken in March 2020, after the balance sheet date, the then-new development plan was assessed as a non-adjusting subsequent event and the potential value of aviptadil for the treatment of COVID-19 was not factored in the valuation of the asset. The asset valuation at December 31, 2020 considered the possible use of aviptadil for COVID-19 and other indications. As a result, the impairment previously recognized was reversed.

 

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Financial expense

Our finance expenses for 2021 were CHF 1.32 million, an increase of 75.6% over finance expenses of CHF 713,000 in 2020. Significant financial expenses in 2021 were the partial recognition of the Share Subscription Facility fee, the change in fair value measurement of contingent liabilities, and negative interests charged on the Group’s Swiss francs deposits. In 2020, financial expenses were mainly constituted by foreign exchange losses.

Comparison of the six months ended June 30, 2022 and 2021

The following table summarizes our results of operations for the six months ended June 30, 2022 and 2021:

 

     For the six months
ended June 30,
 
in CHF thousands (unaudited)    2022      2021      Change  

Revenue

     3,242      —        3,242

Other gains

     1,303      891      412
  

 

 

    

 

 

    

 

 

 

Total income

     4,545      891      3,654

Raw materials and consumables expenses

     (669      —        (669

External selling and distribution expenses

     (465      —        (465

External research and development expenses

     (10,637      (8,307      (2,330

Personnel expenses

     (5,767      (3,439      (2,328

Other administrative expenses

     (3,963      (3,204      (759

Other losses

     —        (458      458
  

 

 

    

 

 

    

 

 

 

EBITDA

     (16,956      (14,517      (2,439

Impairment expense

     (8,226      —        (8,226

Amortization and depreciation expense

     (2,033      —        (2,033
  

 

 

    

 

 

    

 

 

 

Operating loss

     (27,215      (14,517      (12,698

Financial income

     162      127      35

Financial expense

     (1,056      (277      (779
  

 

 

    

 

 

    

 

 

 

Net loss before taxes

     (28,109      (14,667      (13,442

Income taxes

     1,609      (11      1,620
  

 

 

    

 

 

    

 

 

 

Net loss for the period

     (26,500      (14,678      (11,822
  

 

 

    

 

 

    

 

 

 

Revenue and other gains

In the first six months of 2022, we generated CHF 3.24 million of revenue from product sales, licensing fees, and royalties. Prior to the business combination with APR at the end of June 2021, we did not generate any revenue.

Other gains were CHF 1.3 million for the six months ended June 30, 2022, compared to CHF 0.9 million for the six months ended June 2021. In the current period, other gains consisted mainly of a change in the fair value of provisions for contingent liabilities and an impairment reversal following the repayment of a loan issued to NeuroRx in 2020 and for which we had recorded a complete impairment allowance. In the comparative period, other gains related to write-offs of liabilities.

Raw materials and consumables expenses, and external selling and distribution expenses

Raw materials and consumables expenses, and external selling and distribution expenses, were, respectively, CHF 0.7 million and CHF 0.5 million for the six-month period ended June 30, 2022. We did not incur any such expenses prior to the acquisition of APR and AdVita and their respective marketing activities.

External research and development expenses

External research and development expenses increased to CHF 10.6 million for the six-month period ended June 30, 2022, from CHF 8.3 million for the six months ended June 30, 2021, an increase of CHF 2.3 million primarily due to higher expenses incurred by Acer under the license and collaboration agreement and secondarily due to the addition of in-process programs in the acquisition of APR in June 2021. The increase in expenditures associated with ACER-001 and other in-process programs was partially offset by a reduction of CHF 5.7 million in development expenses associated with RLF-100.

We plan to further increase our research and development expenses for the foreseeable future as we commence additional clinical trials and pursue discovery and development of new product candidates.

 

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Personnel expenses

Personnel expenses increased to CHF 5.8 million in the six-month period ended June 30, 2022, compared to CHF 3.4 million for the six-month period ended June 30, 2021, an increase of CHF 2.3 million mainly due to an increase in employee headcount resulting from the acquisitions of APR and AdVita and the establishment of our U.S. sales force. As of June 30, 2022, Relief had 57 full-time equivalents on its payroll.

Other administrative expenses

Other administrative expenses increased to CHF 4 million in the six-month period ended June 30, 2022, compared to CHF 3.2 million for the six-month period ended June 30, 2021, an increase of CHF 0.8 million primarily attributable to our expanded activities with the addition of APR and AdVita. Consulting expenses associated with the preparation of the market launch of PKU GOLIKE® in the U.S. further contributed to the increase. Legal fees remain flat as costs related to Relief’s effort to list its shares on Nasdaq were offset by a reduction in costs incurred for other legal and regulatory matters.

Other losses

Other losses decreased to zero in the six-month period ended June 30, 2022, compared to CHF 0.5 million for the six-month period ended June 30, 2021. Other losses for the comparative period were constituted by an impairment loss on the loan issued to NeuroRx in 2020.

Impairment expense

We conducted an impairment test of intangible assets as of June 30, 2022, and concluded that the carrying amount of certain assets, mainly intangible assets associated with PKU GOLIKE® and Sentinox, exceeded their recoverable amount. As a result, we recognized a non-cash impairment charge on intangible assets of CHF 8.2 million in the current period. The impairment charge reflects a reduction of estimated future net cash flows from PKU GOLIKE® following changes in market assumptions, and, for Sentinox, a one-year delay in the estimated launch date.

Amortization and depreciation expense

Amortization and depreciation expenses were CHF 2 million for the six-month period ended June 30, 2022 and were nil for the six months ended June 2021. Prior to the acquisition of APR in June 2021, we did not have amortizable intangible assets nor material property, plant, and equipment assets on our balance sheet.

Financial income

Financial income increased to CHF 0.2 million in the six-month period ended June 30, 2022, compared to CHF 0.1 million for the six-month period ended June 30, 2021, an increase of CHF 0.1 million primarily due to an increase in foreign exchange gain on monetary assets and liabilities denominated in U.S. dollars and Euros.

Financial expenses

Financial expenses increased to CHF 1.1 million in the six-month period ended June 30, 2022, compared to CHF 0.3 million for the six-month period ended June 30, 2021, an increase of CHF 0.8 million primarily due to the recognition of an interest expense of CHF 0.7 million in relation with contingent liabilities that may become due upon achievement of milestones contractually agreed with the former shareholders of APR and AdVita.

Income taxes

Income taxes were a gain of CHF 1.6 million in the six months ended June 30, 2022, compared to income tax expenses of CHF 0.01 million for the six-month period ended June 30, 2021. The income tax gain resulted mainly from the amortization and impairment of intangible assets and a corresponding reduction in the temporary difference between the carrying amount of these assets and their tax base.

 

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Summary of critical accounting judgements and key sources of estimation uncertainty

Our operating and financial review and prospects were derived from our consolidated financial statements in conformity with IFRS as issued by the IASB. In the preparation of the financial statements, our management were required to make certain estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income, expenses, and related disclosures. The estimates and underlying assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of our assets and liabilities within the next year are described below.

Valuation and impairment of intangible assets

Determining whether intangible assets are impaired requires our management to estimate the recoverable value of the cash-generating unit to which the intangible assets are attributable. If the recoverable value of the cash-generating unit is lower than the carrying amount of the cash-generating unit to which the intangible assets have been allocated, impairment is recorded. Changes to the assumptions may result in impairment losses or impairment reversals in subsequent periods.

Share-based compensation

The fair values of our options issued at their grant date have been assessed using the Black-Scholes valuation model and spread over the vesting period, with the significant inputs being share price, exercise price, expected life of the options, volatility, expected dividends on the underlying share for the expected term of the option, and risk-free interest rate.

Deferred income taxes

The determination of the recoverability of deferred income tax assets is based on the judgement of our management. Deferred income tax assets are only recognized where our management determines that it is probable that the assets can be used in the future. Whether or not they can actually be used, however, depends on whether they can be offset against future taxable profits. In order to assess this probability, our management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies. Deferred tax assets are only recorded when it becomes evident that sufficient future taxable profits are probable.

Sources of Liquidity

To date, we have funded our operations primarily through direct treasury share sales, private placements, and equity offerings and loans from our main shareholder GEM. As Relief continues to incur significant operating losses, our ability to pursue and finance our operations and our intended development plans depends on our ability to continue to raise additional financing.

 

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We expect to continue to raise financing through sale of equity and license and development agreements in connection with collaborations. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of any additional securities may include liquidation or other preferences that adversely affect your rights as a shareholder. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through additional collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us.

We intend to use future expected proceeds, together with cash on hand, to finance our development activities and the diversification of our pipeline, as well as to fund our outstanding liabilities and other commitments. We expect our expenses to increase in connection with our ongoing activities, particularly as we continue to advance our portfolio of product candidates, initiate further clinical trials and seek marketing approval for our product candidates. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to program sales, marketing, manufacturing and distribution to the extent that such sales, marketing and distribution are not the responsibility of potential collaborators. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations.

As of December 19, 2022, we have cash and cash equivalents of approximately CHF 19.9 million.

Based on current financial projections and available cash, we expect that we have sufficient resources to fund operations into 2024, taking into account the net proceeds from this offering.

We expect to need to raise possibly significant additional capital in the future. Our future capital requirements will depend on many factors, including:

 

   

the scope, progress, results and costs of our ongoing and planned preclinical studies and clinical trials;

 

   

the number and development requirements of other product candidates that we may pursue;

 

   

the costs, timing and outcome of regulatory review of our product candidates;

 

   

the duration and severity of the COVID-19 pandemic;

 

   

the timing amount of milestone payments we may have to pay in relation with the acquisitions of APR and AdVita;

 

   

the extent to which we in-license or acquire other product candidates and technologies;

 

   

the costs and timing of future commercialization activities, including drug manufacturing, marketing, sales and distribution, for any of our product candidates for which we receive or have received marketing approval;

 

   

the timing of repayment of the Company’s borrowings; and

 

   

a possible settlement agreement with NeuroRx.

 

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Identifying potential product candidates and conducting preclinical studies and clinical trials is a time-consuming, expensive and uncertain process that takes many years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success.

If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Cash Flows

The following table summarizes our cash flows for each of the periods indicated:

 

     December 31,  
In thousands    2021      2020  

Cash flow from operating activities

     (35,718      (18,254

Cash flow from investing activities

     (30,262      3,005  

Cash flow from financing activities

     67,689        58,200  

Net (decrease) increase in cash and cash equivalents

     1,709        42,951  

Cash and cash equivalents at end of period

     44,761        43,154  

 

     For the six months
ended June 30,
 
in CHF thousands (unaudited)    2022      2021  

Cash and cash equivalents at beginning of period

     44,761      43,154

Cash flow used in operating activities

     (14,730      (17,741

Cash flow used in investing activities

     (4,764      (31,577

Cash flow from financing activities

     4,662      28,780

Decrease in cash and cash equivalents

     (14,832      (20,538

Effect of exchange rates

     (58      600
  

 

 

    

 

 

 

Cash and cash equivalents at end of period

     29,871      23,216
  

 

 

    

 

 

 

Operating Activities

Net cash used in operating activities was approximately CHF 35.7 million in the year ended December 31, 2021, as compared to approximately CHF 18.3 million in the year ended December 31, 2020 and approximately CHF 728,000 in the year ended December 31, 2019. The gradual increase is mainly due to the funding of clinical trials for RLF-100, of ACER-001 development under our collaboration agreement with Acer, and of administrative expenses engaged for general corporate purpose.

Net cash used in operating activities was CHF 14.7 million for the six months ended June 30, 2022, compared to CHF 17.7 million for the six months ended June 30, 2021. The decrease in cash used in operating activities of CHF 3 million was due to an increase in net loss of CHF 11.8 million, primarily driven by an impairment expense of TCHF 8.2 million, and an increase in non-cash items of CHF 7.4 million, offset by changes in net working capital of CHF 7.4 million.

Investing Activities

Cash used in investing activities was approximately CHF 30.3 million in the year ended December 31, 2021, as compared to cash flow from investing activities of approximately CHF 3.0 million in the year ended December 31, 2020, due to our acquisitions of APR Applied Pharma Research and ACER-001 license in 2021.

Net cash used in investing activities was CHF 4.8 million for the six months ended June 30, 2022, compared to CHF 31.6 million for the six months ended June 30, 2021. In the current period, cash used in investing activities consisted mainly of a payment to the former shareholders of AdVita for the completion of a milestone in relation with the issuance of a patent. In the comparative period, cash used in investing activities consisted mainly in payments for the acquisitions of APR and ACER-001 license.

 

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Financing Activities

Cash flow from financing activities was approximately CHF 67.7 million in the year ended December 31, 2021, as compared to approximately CHF 58.2 million in the year ended December 31, 2020 and approximately CHF 600,000 in the year ended December 31, 2019. Cash flow from financing activities came mainly from our Share Subscription Facility with GEM Global Yield LLC, private placements from third parties, and sale of treasury shares.

Net cash from financing activities was CHF 4.7 million for the six months ended June 30, 2022, compared to CHF 28.8 million for the six months ended June 30, 2021. The decrease in cash from financing activities of CHF 24.1 million is primarily due to a decrease of CHF 14.8 million in net proceeds from our Direct Share Placement program and a decrease of CHF 9.1 million in net proceeds from private placements.

APR’s Intangible Assets

APR’s product portfolio is recorded on Relief’s December 31, 2021 balance sheet as follows:

 

     APR product portfolio  


TCHF

   PKU
GOLIKE
    Diclofenac     APR-
TD011
     Sentinox      Others     Total  

COST

              

Balance at December 31, 2020

     —         —         —          —          —         —    

Acquired in APR business combination

     31,244       7,705       47,392        3,487        408       90,236  

Balance at December 31, 2021

     31,244       7,705       47,392        3,487        408       90,236  

ACCUMULATED AMORTIZATION

              

Balance at December 31, 2020

     —         —         —          —          —         —    

Amortization expense

     (1,008     (799     —          —          (33     (1,840

Balance at December 31, 2021

     (1,008     (799     —          —          (33     (1,840

CARRYING AMOUNT

              

at December 31, 2020

     —         —         —          —          —         —    

at December 31, 2021

     30,236       6,906       47,392        3,487        375       88,196  

Estimated remaining useful lives (years)

     15.0       5.0       n/a        n/a        6.5    

The intangible assets acquired in the acquisition of APR are comprised of patents, trademarks, licenses, sub-licenses, technologies, in-process research and development products, and other assets without physical substance.

Products that have reached marketing phase consist mainly of:

 

   

PKU GOLIKE®, an amino acid mix product commercialized for the treatment of phenylketonuria; and

 

   

Diclofenac, a product line indicated for the treatment of inflammatory conditions and for pain management. The active ingredient diclofenac is combined with APR’s proprietary technologies in products with immediate release formulation, or in the form of a topical patch. These products are commercialized by third parties under different brand names, including Cambia®, Voltfast® and Voltadol®.

The corresponding intangible assets will be amortized over their estimated remaining useful lives. Amortization is charged on a straight-line basis over the estimated economic or useful life, whichever is shorter.

In-process research and development (“IPR&D”) projects consisted of:

 

   

APR-TD-011, a clinical-stage drug candidate for the treatment of epidermolysis bullosa; and

 

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Sentinox, a near-to-market product candidate for the reduction of the risk of infections caused by bacteria or viruses.

Quantitative and Qualitative Disclosure about Financial Risks

We are exposed to various financial risks such as credit risk, liquidity risk and market risk (including interest rate and currency risk). The following is an overview of the extent of such risks and our processes employed to handle those risks.

Credit risk

Credit risk refers to the risk that a party will default on its contractual obligations to us, resulting in financial losses. We do not currently have any revenue and as a result we do not have credit risk with relation to our customers. Our financial assets consist of mainly cash, for which the risk is minimal as such deposits are at well-known banks in Switzerland with an “A” rating as per Standard & Poors.

Liquidity risk

Liquidity risk implicates our ability to maintain sufficient cash and cash equivalents to meet our financial obligations. Our management monitors our net liquidity through rolling forecasts of projected cash flows.

Interest rate risk

We have no interest-bearing assets or liabilities, except for short-term cash deposits and a fixed-interest third party loan. Cash deposits held in Swiss francs and Euros are subject to negative interest rates above certain thresholds defined by bank counterparties. We deem interest rate risk as being low.

Currency risk

We are exposed to foreign currency risk primarily through short-term cash deposits held in foreign currencies intended to fund operational expenditures in such currencies (mainly U.S. Dollars, Euros and Swiss francs). We are also exposed to foreign currency risk through third-party loans, other financial assets and trade payables, held or due in foreign currencies. We measure our exposure by periodically assessing future spending needs in foreign currencies.

Based on our analysis and considering that our cash balances in foreign currency are held for the settlement of expected invoices in those currencies, the risk is naturally hedged, and the foreign currency risk is limited.

During the years ended December 31, 2021 and 2020, we did not enter into any forward currency transactions nor any derivative currency contracts.

JOBS Act Exemptions and Foreign Private Issuer Status

We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”) in the United States. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. This includes an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002. We may take advantage of this exemption for up to five years or such earlier time that we are no longer an emerging growth company. We will cease to be an emerging growth company if we have more than $1.07 billion in total annual gross revenue, have more than $700 million in market value of our ordinary shares held by non-affiliates or issue more than $1 billion of nonconvertible debt over a three-year period. We may choose to take advantage of some but not all of these provisions that allow for reduced reporting and other requirements.

 

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We are a reporting company under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as a non-U.S. company with foreign private issuer status. Even after we no longer qualify as an emerging growth company, as long as we qualify as a foreign private issuer under the Exchange Act, we will be exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including:

 

   

the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act;

 

   

sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time;

 

   

the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K, upon the occurrence of specified significant events; and

 

   

Regulation FD, which regulates selective disclosures of material information by issuers.

 

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BUSINESS

Overview

We are a Swiss, commercial-stage biopharmaceutical company identifying, developing and commercializing novel, patent protected products in selected specialty, rare and ultra-rare disease areas on a global basis.

We currently focus on three therapeutic areas where we can best leverage our internal know-how and assets: Rare Metabolic Disorders, Rare Skin Diseases and Rare Respiratory Diseases. We are developing a direct commercial footprint in the United States (U.S.) and have a direct commercial footprint in Europe (EU), coupled with a strong network of commercial partners in the other major territories.

We leverage our internal R&D laboratories and track record in drug delivery systems and technologies to identify and take to market reformulated and/or repurposed drugs with a history of proven human safety and efficacy using a lean and capital efficient organization where all key strategic functions are internalized, combined with an optimized network of outsourced service providers for various development activities.

Our products and product candidates are intended for patients and care givers dealing with specialty, rare and ultra-rare debilitating diseases, by offering them novel treatment options engineered with patented drug delivery systems or repurposed and optimized drugs, to help them live their best possible lives and achieve their full potential.

We are led by a proven and seasoned management team of business leaders with significant experience in discovering, developing and commercializing important new medicines, delivering them to market and maximizing shareholder value. Collectively, the members of our management team have overseen research and development of products supporting regulatory approvals as well as commercial launches of marketed products.

Our diversified portfolio comprises a rare disease product that is commercialized in the EU and that we launched in the U.S. in the last quarter of 2022, as well as a pipeline of products at various stages of development that are focused on rare and specialty diseases in selected therapeutic areas. In addition, the Company is commercializing several legacy products via licensing and distribution partners

We are actively pursuing a strategy to diversify our portfolio and are continuously evaluating in-licensing and partnering opportunities. To bring assets to the market as quickly as possible, we are seeking partnerships with, or acquisitions of, companies that have late-stage clinical molecules with a strong human safety profile, allowing for relatively short, capital-efficient clinical trials with clear endpoints. Our focus on rare diseases with significant unmet medical need allows us to maintain a lean organization, with a strong, experienced leadership able to deliver growth by effectively managing partnerships and efficiently allocating capital across the portfolio.

In March 2021, we signed a Collaboration and License Agreement with Acer Therapeutics, Inc. (“Acer”) for the worldwide development and commercialization of ACER-001 for the treatment of Urea Cycle Disorders (“UCDs”) and Maple Syrup Urine Disease (“MSUD”). ACER-001 is a proprietary powder formulation of sodium phenylbutyrate (NaPB) designed to be both taste-masked and immediate release.

In August 2021, Acer submitted an NDA for ACER-001 to the FDA for use as a treatment of UCD, which submission was accepted for filing in November 2021 with a PDUFA decision date of June 5, 2022. However, on or about the PDUFA decision date, Acer received a complete response letter stating that a satisfactory inspection of Acer’s third-party contract manufacturer would be required before its NDA for ACER-001 could be approved. Acer has now resubmitted its NDA, which has been accepted for filing with a January 15, 2023 PDUFA target date. Further, Acer has recently filed an IND to investigate ACER-001 for the treatment of Maple Syrup Urine Disease.

 

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Assuming Acer’s NDA for ACER-001 for the treatment of UCD is approved, Relief, in accordance with its collaboration agreement with Acer, plans to apply for marketing authorization for this product to European and U.K. regulatory authorities. There can be no assurance, however that ACER-001 will be approved for commercialization in the U.K. or the EU.

In June 2021, we signed and closed a definitive agreement to acquire all outstanding shares of APR Applied Pharma Research SA (“APR”), a privately held Swiss pharmaceutical company with over 25 years’ experience in identifying, developing and commercializing known molecules engineered with drug delivery systems in niche and rare diseases on a global basis.

On March 15, 2022, we signed a binding term sheet with Meta Healthcare Ltd. (“Meta”), our United Kingdom distribution partner for GOLIKE, to acquire the worldwide commercialization rights, except in the United Kingdom, for a novel dosage form of a prescription drug already approved by the FDA and intended for the treatment of patients with PKU. At this time, we plan to file an IND for the novel dosage form in the U.S. as soon as possible and to file for FDA regulatory approval in the first quarter of 2023 and a filing of the 505(b)(2) NDA before the end of 2023. Additionally, Meta has submitted a patent application in the United Kingdom and we intend to seek a patent extension in all major territories including the U.S. and Europe.

Further, in July 2021, Relief acquired AdVita Lifescience GmbH (“AdVita”), a Germany-based privately held pharmaceutical company developing products for the treatment and diagnosis of rare lung diseases. Relief believes that AdVita’s capabilities will help the Company to further progress the development of RLF-100® for a range of lung diseases.

Previously, Relief had partnered with NeuroRx, Inc. (“NeuroRx” to seek to develop RLF-100® for the treatment of COVID-19. In March 2020, at the beginning of the first wave of the pandemic in the United States, NeuroRx submitted an Investigational New Drug (“IND”) application to the FDA for a phase 2b/3 trial of RLF-100 for the intravenous (“IV”) treatment of patients with critical COVID-19 respiratory failure. Within 24 hours, the FDA issued a “Study May Proceed” letter and the first patients were subsequently treated in April 2020 at Thomas Jefferson University Hospital in Philadelphia.

In September 2020, Relief entered into a binding collaboration agreement with NeuroRx (the “Collaboration Agreement”). The Collaboration Agreement established the terms under which we and NeuroRx collaborate and assist each other to maximize the revenues in our respective territories from the sale of aviptadil for intravenous and inhale use primarily for the treatment of COVID-19 related conditions. The collaboration agreement provided that NeuroRx would be responsible for developing and commercializing the product in the United States, Canada and Israel and that Relief would be responsible for developing and commercializing the product in the European Union, Switzerland, Iceland, Norway, the United Kingdom, the Channel Islands, Lichtenstein, Monaco, Andorra, San Marino and Vatican City. The collaboration agreement also provided that it would be conducted on an exclusive basis and that neither party could develop or commercialize any product competitive with RLF-100.

In late 2020 and into early 2021, NeuroRx conducted a phase 2b/3 trial of intravenous aviptadil to evaluate its use in the treatment of respiratory failure due to COVID-19. In March 2021, NeuroRx reported the results of that trial. In its press release reporting those results, NeuroRx reported that across all patients and sites RLF-100 IV met the primary endpoint for successful recovery from respiratory failure at days 28 (p=0.14) and 60 (p=0.13) and also demonstrated a meaningful benefit in survival after controlling for

 

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ventilation status and treatment site. However, they also reported that the trial did not demonstrate a statistically-significant difference on the study’s primary endpoint without statistical adjustment for these pre-specified covariates. On the basis of these findings, NeuroRx announced on June 1, 2021 that it had applied to the FDA for Emergency Use Authorization (“EUA”) and that it planned to submit a New Drug Application with the FDA. Also in March 2021, NeuroRx announced that RLF-100 had been selected for inclusion in “TESICO” (Therapeutics for Severely Ill Inpatients with COVID-19), a phase 3 multicenter clinical trial that will include sites in the United States and multiple foreign countries, that is being sponsored by the U.S. National Institutes of Health (“NIH”).

While we have received a phase 2b/3 Study Report summary from NeuroRx, NeuroRx has refused to share the full clinical trial data with us, which has prevented us from moving forward to seek approval for the product in its territories. Further, on November 5, 2021, NRx announced that the FDA had declined NeuroRx’s application for EUA of IV aviptadil for the treatment of acute respiratory failure due to critical COVID-19. Subsequent applications filed by NeuroRx with the FDA seeking EUA for more limited use of the product for the treatment of COVID-19 and for breakthrough therapy designation for the product were also denied in the first half of 2022. Finally, in May 2022, Relief learned that the TESICO/Active 3b trial evaluating aviptadil for the treatment of COVID-19 had been discontinued by its Data Safety Monitoring Board based on futility.

Based on numerous breaches of the Collaboration Agreement by NeuroRx, in October 2021, we filed a lawsuit against NeuroRx and its then CEO, Dr. Jonathan Javitt, for multiple breaches of the Collaboration Agreement. The complaint was filed in the Supreme Court of the State of New York in Manhattan. The complaint alleged that the defendants are in breach of numerous provisions of the Collaboration Agreement. The complaint, among other remedies, seeks damages, an order compelling defendants to comply with multiple provisions of the Collaboration Agreement, and a declaration directing NeuroRx to deliver the entire data set from the Phase 2b/3 clinical trial of intravenously-administering aviptadil to Relief. On January 10, 2022, NeuroRx filed a complaint against Relief alleging that we were in breach of the Collaboration Agreement and have thus repudiated and cancelled the Collaboration Agreement. Additionally, NeuroRx’s claims included a count for defamation.

On August 22, 2022, Relief and NRx issued a press release announcing that they had agreed to a tentative settlement of the pending litigation. The parties announced that they had agreed to work collaboratively to finalize the settlement within the next thirty days. Further, the parties announced that they had agreed to stay the litigation for an additional sixty days to allow for the negotiation and execution of the definitive settlement agreement and related terms. This litigation stay was later extended to November 11, 2022.

On November 14, 2022, Relief and NRx issued a press release announcing that the parties had entered into a definitive settlement agreement to resolve all matters relating to the pending litigation. At the closing of this settlement, held on December 19, 2022, (i) NRx transferred to Relief all of the assets that it previously used in its aviptadil development program, including its regulatory filings, patent applications, clinical data, and the formulation of the aviptadil product it was previously developing, (ii) Relief has the exclusive right and control going forward to develop and commercialize an aviptadil product, (iii) Relief has agreed to use commercially reasonable efforts to continue the existing Right to Try Program for aviptadil in the United States for at least 2 years, (iv) Relief will pay NRx milestone payments if it can successfully obtain commercial approval of an aviptadil product (whether for COVID-19 or any other indication), (v) Relief will pay NRx royalties based on a percentage of future sales of an aviptadil product (whether for COVID-19 or any other indication), up to a maximum of $30 million in the aggregate, (vi) NRx Pharmaceuticals has agreed not to compete in the development of an aviptadil product in the future, and (vii) at the closing, Relief and NRx Pharmaceuticals have dismissed their pending litigation.

On November 24, 2021, we announced that we had entered into a collaboration agreement with InveniAI LLC (“InveniAI”), a U.S. based company that has pioneered the application of artificial intelligence and machine learning across biopharma and other industries, in order to identify promising drug candidates to treat rare and specialty diseases (the “InveniAI Collaboration Agreement”). Under the terms of the InveniAI Collaboration Agreement, InveniAI will use its proprietary platform for the identification of potential pharmaceutical product opportunities using its Pharma Big Innovation Data Lab, consisting of (i) its proprietary AlphaMeld platform, a cloud-based artificial intelligence platform that uses its proprietary machine learning and deep learning based neural networks to identify product opportunities in therapeutic areas, (ii) its cross-functional teams at its Integrated Center of Excellence, and (iii) domain expertise, to generate novel pharmaceutical opportunities and the related development pathway for the development of such concepts.

Under the terms of the InveniAI Collaboration Agreement, we paid InveniAI an initial up-front fee of $500,000. We will be required to pay success milestones for any products brought to us in connection with the InveniAI Collaboration Agreement ranging from $200,000 per product candidate for which we exercise our option to acquire IP rights to $50 million for any required product reaching $1 billion per year in net sales. We will also be required to pay royalties on any such commercialized product in certain countries a royalty of approximately 3%.

We are not currently developing any product brought to us by InveniAI, and there can be no assurance that our collaboration with InveniAI will result in the development of new product candidates or product concepts.

Capital Resources

As of December 31, 2021, we had cash and cash equivalents of approximately CHF 44.8 million, As of December     , 2022, we have cash and cash equivalents of approximately CHF 19.9 million.

 

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Based on current financial current projections and available cash, we expect that we have sufficient resources to fund operations into the third quarter of 2023, without taking into account the proceeds from this offering. We also believe that that with a successful launch of ACER-001 and the potential expansion of our the GOLIKE® franchise into the United States, of which there can be no assurance, we could reach operating cash flow-breakeven in late 2024 and positive operating cashflow in early 2025, of which there can be no assurance. These forecasts of available cash assume no revenues from sales of RLF-100 (aviptadil).

Our Strategy

We intend to leverage our internal R&D capabilities and track record in drug delivery systems and technologies to identify and take to market reformulated and/or repurposed drugs with a history of proven safety and efficacy using a lean and capital efficient organization where all key strategic functions are internalized, combined with an optimized network of outsourced service providers for various development activities.

Our products and potential products are intended for patients and care givers dealing with specialty, rare and ultra-rare debilitating diseases, by offering them novel treatment options engineered with patented drug delivery systems or repurposed and optimized drugs, to help them live their best possible life and achieve their full potential.

We currently focus on three therapeutic areas for which we can best leverage our internal know how and assets: Rare Metabolic Disorders, Rare Skin Diseases and Rare Respiratory Diseases. We have a direct commercial footprint in the U.S. and in the EU, coupled with a strong network of commercial partners in the other major territories.

Our goal is to focus on clinical stage projects with a history of clinical testing and use in human patients or a strong scientific rationale. We are dedicated to developing these drugs to make a positive difference in the lives of patients suffering from severe conditions. Specifically, we intend to:

 

   

Develop ACER-001. Together with our collaboration partner Acer Therapeutics Inc. (“Acer”), we are currently pursuing approval for use of ACER-001 for the treatment of Urea Cycle Disorders (“UCDs”). We also intend to pursue the development of ACER-001 for the treatment of Maple Syrup Urine Disease (“MSUD”).

 

   

Develop RLF-100 for the treatment of certain lung conditions. We intend to focus on developing RLF-100 for the treatment of, among other indications, non-COVID-19 related ARDS, Checkpoint Inhibitor-induced Pneumonitis, and pulmonary sarcoidosis. We believe that the work of our AdVita subsidiary, will help us develop this product for multiple lung diseases.

 

   

Maximize the value of the development and commercial pipeline of APR, including capitalizing on the recent commercial launch in the U.S. of PKU GOLIKE® as a medical food for the treatment of Phenylketonuria (“PKU”) as well as the completion of the development of the recently acquired product from Meta Healthcare for the treatment of PKU.

 

   

Seek to acquire additional products. We have in the past sought out late-stage products that fit our profile and we plan to continue to seek such products in the future.

 

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Product Portfolio and development pipeline

Relief’s product portfolio includes assets for a number of therapeutic indications and encompasses all stages of the product life cycle, thereby presenting a diversified and risk-mitigated portfolio.

 

LOGO

ACER-001

Sodium phenylbutyrate (NaPB) is currently approved in the U.S. and the European Union to treat patients with Urea Cycle Disorders (“UCDs”). In collaboration with Acer Therapeutics, we are developing ACER-001 (proposed trade name Olpruva), a proprietary immediate release multi-particulate powder formulation of NaPB with a taste-masked coating designed potentially to treat UCDs and MSUD.

ACER-001 for the Treatment of Urea Cycle Disorders

The urea cycle is a series of biochemical reactions that occur primarily in the liver, which converts toxic ammonia produced by the breakdown of protein and other nitrogen-containing molecules in the human body into urea for excretion. Primary hyperammonemia is a term to describe an elevation of ammonia in blood or plasma due to a defect within the urea cycle, which is the pathway responsible for ammonia detoxification and arginine biosynthesis. Urea cycle disorders (UCDs) are rare diseases caused by genetic defects affecting any of the six enzymes or two transporters that are directly involved in the urea cycle function. The clinical situation is variable and largely depends on the time of onset. Newborns who are often affected by hyper-ammonaemic encephalopathy carry a potential risk of severe brain damage, which may lead to death. Outside the neonatal period, symptoms are very unspecific but most often neurological (with wide variability), psychiatric and/or gastrointestinal. Early identification of patients is extremely important to start effective treatment modalities immediately. The acute management includes detoxification of ammonia, which often requires extracorporeal means such as hemodialysis, and the use of intravenous drugs that work as nitrogen scavengers. Long-term management of patients with UCDs consists of a low-protein diet, which needs to be balanced and supplemented to avoid deficiencies of essential amino acids, trace elements or vitamins and the use of nitrogen scavengers.

 

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Diagnosis and Incidence

The diagnosis of UCDs is based on clinical observations, confirmed by biochemical and molecular genetic testing. A plasma ammonia concentration of 150 µmol/L or higher associated with a normal anion gap and a normal plasma glucose concentration is an indication for the presence of UCDs. Plasma quantitative amino acid analysis and measurement of urinary orotic acid can distinguish between the various types of UCDs. A definitive diagnosis of UCDs depends on either molecular genetic testing or measurement of enzyme activity. Molecular genetic testing is possible for all urea cycle defects. Studies suggest that the incidence of UCDs in the U.S. is 1 in 35,000 live births. Approximately 2,000 patients suffer from UCDs in the U.S.

Current treatment options for UCDs

The current treatment of UCDs consists of dietary management to limit ammonia production in conjunction with medications that provide alternative pathways for the removal of ammonia from the bloodstream. Dietary protein must be carefully monitored, and some restriction is necessary; too much dietary protein causes excessive ammonia production. However, if protein intake is too restrictive or insufficient calories are consumed, the body will break down lean muscle mass to obtain the amino acids or energy it requires, which can also lead to excessive ammonia in the bloodstream. Dietary management may also include supplementation with special amino acid formulas developed specifically for UCDs, which can be prescribed to provide approximately 50% of the daily dietary protein allowance. Some patients may also require individual branched-chain amino acid supplementation.

Medications for UCDs primarily comprise nitrogen scavenger drugs, which are substances that provide alternative metabolic excretion pathways for nitrogen, thereby bypassing the urea cycle. The use of these alternative pathways for nitrogen removal is important for the management of acute episodes of hyperammonemia and are also included as part of a long-term treatment regime for UCD patients. Current nitrogen scavenger treatments for UCDs are based on sodium benzoate or phenylbutyrate, which conjugate with glycine and glutamine, respectively, allowing for urinary excretion of nitrogen as hippurate and phenylacetylglutamine, respectively.

According to a 2016 study by Shchelochkov et al., published in Molecular Genetics and Metabolism Reports, while nitrogen scavenging medications are effective in helping to manage UCD, non-compliance with treatment is common. Reasons given for non-compliance include the unpleasant taste associated with available medications, the frequency with which medication must be taken and the high cost of the medication.

Phenylbutyrate is available as NaPB, which is marketed as BUPHENYL (sodium phenylbutyrate), and RAVICTI (glycerol phenylbutyrate). While a study provided by Horizon Therapeutics, Inc. in the RAVICTI package insert involving 46 adults with UCD demonstrated that BUPHENYL and RAVICTI were similarly effective in controlling the blood level of ammonia over a 24-hour period, many patients who take their medicine orally prefer RAVICTI, as it is significantly more palatable than BUPHENYL. However, the very high annual treatment cost of RAVICTI, based on patient weight, is often prohibitive. Phenylburate is also marketed in Europe, Australia and New Zealand under the trade name Pheburane.

 

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Ammonaps, another formulation of NaPB that claims to be tasteless and odor free is approved and marketed in Europe.

In cases where dietary management or medication is not effective, patients with UCD may require a liver transplant.

Rationale for ACER-001 treatment in UCDs

Two Phase 1 bridging studies that evaluated the bioavailability and bioequivalence of ACER-001 (sodium phenylbutyrate) compared to sodium phenylbutyrate (BUPHENYL®) powder showed the bioequivalence of ACER-001 administered as a suspension with sodium phenylbutyrate (BUPHENYL®) powder administered as a solution in healthy adult volunteers after a single dose under fasting and fed conditions (Steiner 2022).

Additionally, two Phase 1, open-label, repeated measures, taste assessment studies of polymer-coated sodium phenylbutyrate (ACER-001) and sodium phenylbutyrate (BUPHENYL®) powder, conducted on healthy panelists who were required to complete a training program for a minimum of 6 months that educated panelists on the identification, description, and quantification of sensory attributes of products, concluded that ACER-001 had overall lower flavor intensity scores than sodium phenylbutyrate (BUPHENYL®) powder when administered within five minutes of preparation (Cedarbaum 2022) .

Currently approved therapies for UCDs, including BUPHENYL and RAVICTI, are required to be administered with food. BUPHENYL is required to be administered in a fed state due to its aversive odor and taste, with side effects including nausea, vomiting and headaches, which can lead to discontinuation of treatment. Additionally, prescribing information states that the BUPHENYL food effect is unknown. RAVICTI PK and pharmacodynamic (“PD”) properties were determined to be indistinguishable in fed or fasted states. ACER-001 is uniquely formulated with its multi-particulate, taste-masked coating to allow for administration in a fasted state, while still allowing for rapid systemic release.

Based on the results from the food effect study within the first ACER-001 BE trial, Acer commissioned Rosa & Co. LLC to create a PhysioPD PK model to evaluate the potential food effect on exposure, tolerability, and efficacy of ACER-001 in UCDs patients. Results from this in silico model suggested that administration of ACER-001 in a fasted state required approximately 30% less PBA to achieve comparable therapeutic benefit to that in a fed state. In addition, the model predicted that administration of ACER-001 in a fasted state compared to administration of BUPHENYL or RAVICTI (same amounts of PBA) in their required fed states would be expected to result in higher peak blood PBA, PAA and PAGN concentrations, which should achieve a 43% increase in urinary PAGN levels (a negative correlation between blood ammonia area under the curve and 24-hour urinary PAGN amount has been demonstrated).

 

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LOGO

In February 2021, Acer announced topline results from its bioequivalence trial in which ACER-001 showed similar relative bioavailability to BUPHENYL (sodium phenylbutyrate) under fed conditions. The single-center, single-blind, randomized, single-dose crossover trial evaluated BE of ACER-001 compared to BUPHENYL when administered under fed conditions in 36 healthy adults. The topline data from this trial showed ACER-001 to have similar PK profiles for both PBA and PAA compared to BUPHENYL under fed conditions.

Registration Plan for UCDs

In August 2021, Acer submitted an application in the U.S. to market ACER-001 for administration initially under fed conditions for the treatment of UCDs using a regulatory pathway established under section 505(b)(2) of the Federal Food, Drug and Cosmetic Act (“FDCA”) that allows applicants to rely at least in part on third party data for approval, which may expedite the preparation, submission, and approval of a marketing application. We also intend to seek EMA approval in the European Union and potentially other territories outside the U.S., after the 505(b)(2) NDA for treatment of UCDs is filed. Because the FDA has approved an NDA for BUPHENYL, which is referred to as the reference listed drug (“RLD”), we intend to rely on the RLD’s preclinical and clinical safety and efficacy data, while supplementing the data with a bridging study that shows similar relative bioavailability of ACER-001 to BUPHENYL.

On May 25, 2021, Acer and Relief announced the outcome of Acer’s pre-NDA meeting with the FDA for ACER-001 for the treatment of UCDs. The purpose of the pre-NDA meeting was to discuss the content of Acer’s planned NDA submission. Acer submitted its NDA application on August 5, 2021. In June 2022, the FDA issued Acer a Complete Response Letter (CRL) stating that satisfactory inspection of Acer’s third-party contract packaging manufacturer is required before the NDA could be approved. The FDA did not cite any other approvability issues in the CRL pertaining to the NDA, nor did the FDA request any additional clinical or pharmacokinetic studies be conducted prior to FDA action. The FDA designated the NDA as a Class 2 resubmission and set a PDUFA target action date of January 15, 2023. Assuming the

 

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NDA is approved, Relief anticipates commercialization of ACER-001 for UCDs in the U.S. in the first half of 2023, pursuant to FDA approval in early 2023, after which Relief, in accordance with its collaboration agreement with Acer, intends to submit a Marketing Authorization Application for approval of ACER-001 for the treatment of UCDs in the U.K. and EU. There can be no assurance, however, that ACER-001 will be approved for commercialization in the U.K. or the EU.

In parallel or after initial potential FDA approval for administration under fed conditions, and subject to additional capital, we also plan to evaluate potential development of ACER-001 for administration under fasted (pre-meal) conditions, which will likely require additional nonclinical and clinical studies to provide the necessary evidence of safety and efficacy of ACER-001 to be considered for FDA approval for administration under fasted (pre-meal) conditions.

ACER-001 for the treatment of MSUD

MSUD is a rare inherited disorder caused by defects in the mitochondrial branched-chain ketoacid dehydrogenase complex, which results in elevated blood levels of the branched-chain amino acids (“BCAA”), leucine, valine, and isoleucine, as well as the associated branched-chain ketoacids (“BCKA”) in a patient’s blood. Left untreated, this can result in neurological damage, mental disability, coma, or death. The most severe presentation of MSUD, known as “classic” MSUD, accounts for 80% of cases and can result in neonatal onset with encephalopathy and coma. Although metabolic management of the disease is possible via a highly restrictive diet, the outcome is unpredictable, and a significant portion of affected individuals are mentally impaired or experience neurological complications.

Diagnosis and incidence of MSUD

MSUD is typically diagnosed at birth via newborn screening. Studies indicate that MSUD affects an estimated 1 in 185,000 infants worldwide. The disorder occurs more frequently in the Old Order Mennonite population, with an estimated incidence of about 1 in 380 newborns, and the Ashkenazi Jewish population, with an estimated incidence of 1 in 26,000. Approximately 3,000 patients suffer from MSUD worldwide, of whom approximately 1,000 are located in the U.S.

Current treatment options in MSUD

There are currently no approved pharmacologic therapies in the U.S. or the European Union for MSUD. Treatment of MSUD consists primarily of a severely restricted diet to limit the intake of BCAA, with aggressive medical interventions when blood-levels of BCAA or BCKA become elevated.

Rationale for ACER-001 Treatment in MSUD

Therapy with NaPB in UCD patients has been associated with a selective reduction in BCAA despite adequate dietary protein intake.

Based on this clinical observation, investigators at Baylor College of Medicine (“BCM”) explored the potential of NaPB treatment to lower BCAA and their corresponding BCKA in patients with MSUD. The investigators found that BCAA and BCKA were both significantly reduced following NaPB therapy in control subjects and in patients with MSUD, although there was no simple correlation between the patients’ levels of residual enzymatic activity with the response of plasma BCAA and their BCKA to NaPB. NaPB showed a statistically significant reduction of BCAA leucine, in all three healthy subjects and in three out of the five MSUD patients who participated in the trial. The reduction in leucine, the most toxic of the BCAAs, in the three responsive MSUD patients ranged between 28-34%, which is considered by clinicians to be a clinically meaningful response.

 

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Investigators at BCM further explored the mechanistic rationale for NaPB lowering BCAA/BCKA levels. NaPB was found to be an allosteric inhibitor of the branched-chain keto acid dehydrogenase complex kinase (“BCKD-kinase”), and enzyme that regulates the activity of the branched-chain keto acid dehydrogenase complex (“BCKDC”) enzyme that is responsible for the normal metabolism of BCKAs. By inhibiting the BCKD-kinase, the BCKDC is constitutively activated, thus the increased activity results in a reduction in the plasma levels of BCAA and BCKA in all people, including those with MSUD, suggesting that NaPB may be an effective treatment for people with MSUD, who experience elevated BCAA levels.

In November 2020, study results evaluating the effect of NaPB in the management of acute MSUD attacks in pediatric patients (n=10) were published in the Journal of Pediatric Endocrinology and Metabolism showing a significant reduction in leucine levels in MSUD patients experiencing an acute attack. However, verifying this outcome would require additional validation in a controlled trial. If ACER-001 is approved for the treatment of chronic MSUD, we believe patients will not be required to interrupt their therapy in the event of an acute crisis.

Registration Plan for MSUD

Acer has submitted an IND application to the FDA to evaluate the safety and efficacy of ACER-001 for the treatment of MSUD, and although there can be no assurance, we expect that Acer will begin such study during the first quarter of 2023. Given its regulatory status with regard to UCDs, there is no requirement for phase 1 studies in healthy volunteers. The timing of a phase 2 clinical trial, if such a trial occurs, would be subject to completion of a commercial assessment of the opportunity, including, but not limited to, a possible pre-IND meeting with the FDA and/or the EMA, with an objective of validation and agreement on the primary and secondary clinical trial end-points, which remain important given that there are presently no approved treatment options for this disease nor are there guidelines to assess efficacy and safety of an investigational drug in this disease. If a successful clinical trial for ACER-001 in MSUD is completed, along with our partner Acer, we plan to seek FDA approval to market ACER-001 for the treatment of MSUD as an added indication in the U.S. by submitting a supplemental NDA (sNDA) incorporating the efficacy and safety data from the MSUD population, assuming ACER-001 is approved for the treatment of UCDs prior to sNDA submission. We also intend to seek approval in the European Union and other territories outside the U.S. after the sNDA for treatment of MSUD is filed, or simultaneously with the U.S. filing.

Royalty Sharing for ACER-001

The companies will split net profits from ACER-001 from Acer’s territories (consisting of the United States, Canada, Turkey, Japan, and Brazil) 60%:40% in favor of Relief. In addition, Relief has licensed the rights for the rest of the world, where Acer will receive from Relief a 15% royalty on all revenues received in Relief’s territories.

PKU GOLIKE®

Phenylketonuria

Phenylketonuria is a rare metabolic disorder that hinders the body’s ability to break down the amino acid phenylalanine, resulting in a dangerous build-up of phenylalanine when patients eat foods containing protein or aspartame. According to a study published in August 2020 in the American Journal of Human Genetics, approximately 450,000 people suffer from PKU worldwide. If diet is not controlled in patients with PKU, these high levels of the amino acid can lead to severe symptoms, including:

 

   

a musty odor in the breath, skin or urine, caused by too much phenylalanine in the body;

 

   

neurological problems, which may include seizures;

 

   

skin rashes (eczema);

 

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fair skin and blue eyes, because phenylalanine can’t transform into melanin, the pigment responsible for hair and skin tone;

 

   

abnormally small head (microcephaly);

 

   

hyperactivity;

 

   

cognitive disorders and intellectual disability;

 

   

delays in development;

 

   

behavioral, emotional and social problems; and

 

   

psychiatric disorders.

In classic PKU, the enzyme needed to convert phenylalanine (PHE) is missing or severely reduced, which can result in high build-up of phenylalanine and severe systemic damages mainly in the brain. These patients have a diet composed by 75% of PHE-free AA supplementation and only 25% of natural proteins. In more mild or moderate forms, the enzyme retains some function, but a reduced intake of PHE is still recommended to reduce the risk of significant symptoms.

A further reduction of PHE levels is important before conception: pregnant women with PKU, including those with less severe forms of the disease, may place their unborn children at risk by not following the PKU diet. Children of woman with untreated PKU may have an unusually small head (microcephaly), congenital heart disease, developmental abnormalities, or facial abnormalities. There is a strong relationship between the severity of these symptoms and high PHE levels in the mother.

Current treatment options for PKU

While PKU is not curable, if diagnosed early enough, an affected newborn can grow up with normal brain development by managing and controlling PHE levels through diet, or a combination of diet and medication. Diet is composed by few amounts of natural food (based on severity of the disease) supplemented with AA mix with absence or low PHE content plus low protein foods. Diet is recommended for the entire life since it has been demonstrated that high PHE levels has an impact not only during growing but also in adulthood. In 2018, the FDA approved an enzyme substitute called pegvaliase, sold by BioMarin Pharmaceuticals under the brand name Palynziq. Palynziq is a derivative of e phenylalanine ammonia-lyase that metabolizes phenylalanine to reduce its blood levels (but it is not able to produce Tyrosine as the natural enzyme, which need to be still supplemented). Tetrahydrobiopterin (BH4), a cofactor for the oxidation of phenylalanine, when taken by mouth, is also thought to reduce blood levels of phenylalanine in some people. Along with Palynziq, BioMarin Pharmaceuticals also markets Kuvan (sapropterin dihydrochloride) for the treatment of PKU. There are also other amino acid products, sold both by prescription and over-the-counter, that are marketed towards PKU patients

PKU GOLIKE for the dietary treatment of PKU

Patients with PKU require supplementation of amino-acid based foods for special medical purposes (“FSMP” or “Medical Formula”) to prevent protein deficiency and optimize metabolic control. Many of these FSMPs can result in poor dietary compliance due to their taste and odor. Further, the unpleasant odor and aftertaste of current amino acid supplements can become a barrier to social interaction for PKU patients. In addition, proteins needed for normal growth and coming from natural food sources are broken down during the digestion process and are gradually absorbed, keeping blood amino acid levels sufficient stable over time. On the opposite, free-AA mix administered to PKU patients in the form of FSMPs are not comparable to natural proteins because they do not need to be broken down before they are absorbed, resulting in a rapid peak of absorption and rapid decrease of their concentration into the bloodstream.

 

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This rapid peak in blood amino acids following ingestion of FSMPs impairs the ability of the body to process them properly and incorporate them into the body’s own tissues (through a process known as “anabolism”) resulting in a portion of unprocessed amino acids which are then oxidated and eliminated. This rapid elimination of unprocessed AAs that is associated with traditional FSMPs represents a fundamental unmet need for PKU patients especially during any prolonged fasting period.

In order to compensate for the low levels of amino acids during fasting periods, the body is forced to initiate a process called “catabolism” where the body will break down lean muscle mass to obtain the amino acids or energy it requires.

PKU GOLIKE is the first prolonged-release amino acid mix product with taste and odor masking and the ability to mimic the absorption time and profile of natural proteins. With these characteristics, PKU GOLIKE® is a uniquely differentiated product, offering improved metabolic management and better compliance for PKU patients of all age groups. PKU GOLIKE is an extended-release, PHE-free amino acids engineered to modify their release and absorption so as to mimicking the physiological absorption of dietary proteins. A pharmaceutical process applied to AAs, patented as Physiomimic TechnologyTM, allows the production of minute taste and odor-masked coated granules for oral administration which are gradually released and absorbed in a prolonged physiologic manner in the gut.

On September 9, 2021, Relief announced that APR has launched, through its affiliates in Germany and Italy, PKU GOLIKE KRUNCH, a chewable tablet for the dietary management of PKU.

Relief is planning to expand the PKU GOLIKE commercial infrastructure beyond the current countries where APR is present and aims to strengthen the commercial activities to increase and accelerate future growth. PKU GOLIKE is currently promoted and marketed by a direct sales and marketing infrastructure in Germany, Italy, Switzerland and Austria; in addition, the product is marketed in the UK and Spain by local distributor under contract with APR. Relief also plans to commercialize PKU GOLIKE in the U.S. as a medical food (which does not require FDA approval), but there can be no assurance it will be successful in its commercialization efforts.

In the U.S., PKU Golike has been granted Orphan Drug Designation (“ODD”) for its development as an orphan prescription drug. We have since determined not to pursue this project, APR-OD031, as a prescription project and will maintain PKU GOLIKE solely as a medical food.

APR-OD032 for the treatment of PKU

Through a definitive agreement with Meta Healthcare Ltd. (“Meta”), we have acquired the worldwide rights, title and interest, except in the UK, for a novel dosage form of a prescription drug already approved by the FDA and intended for the treatment of patients with PKU. This improved product is expected to increase patient acceptance and compliance as well as secure easy metered dosing and dispensing. Meta will provide the technology transfer package, while Relief will conduct clinical studies, manufacturing, regulatory submission and commercialization in the U.S. and EU.

According to the terms of the purchase agreement, Meta will transfer to us all data, know-how, as well as any intellectual property as developed or generated so far by Meta. Relief will only be responsible for funding the remaining development work as well as for filing and prosecuting a new drug application in all countries worldwide except for the UK where we will grant a license back to Meta, enabling Meta to market the product. Other than the initial acquisition payment and low double-digit royalty payments on net profits of the product in the various countries, we will be under no obligation to fund or pay any other amount to Meta.

 

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We anticipate filing an IND application in the first quarter of 2023 and a filing of the 505(b)(2) NDA before the end of 2023. There can be no assurance as to the timing of such 505(b)(2) NDA filing and whether it will be approved.

Nexodyn AOS

Nexodyn Acid-Oxidizing Solution (AOS) is a TECHLO technology based product proven to restart wound healing of chronic, non-healing wounds by creating the ideal microenvironment to sustain the physiological healing process. A clinical studies and real-world experience have consistently shown accelerated closure of chronic wounds with reduced infection rates and less wound-associated pain.

Nexodyn AOS is a solution of highly pure and stabilized hypochlorous acid (HClO >95% of free chlorine species), acidic pH (2.5 – 3.0) with high Reduction-Oxidation Potential (ORP 1.000 – 1.200 mV). The product is a self-administered sprayable solution with ancillary antimicrobial properties intended for use in the debridement, irrigation, cleansing and moistening of acute and chronic wounds (e.g., diabetic foot ulcers, pressure ulcers, and vascular ulcers), post-surgical wounds, burns and other lesions. The product is certified in the European Union as a Class III medical device.

The anti-microbial and anti-inflammatory properties of Nexodyn AOS, along with its tolerability, could make this an attractive treatment candidate for the management of wounds in Epidermolysis Bullosa, with the potential to be the only product approved for the control of wound infection in this disease, thereby reducing long term antibiotic use, whilst assisting wound healing and decreasing wound related pain, all of which would significantly benefit quality of life in patients with this genetic disorder.

Setofilm / Ondissolve

SETOFILM is the first prescription-only medicine approved in Europe and Canada, developed as an orodispersible film (ODF) formulation to be registered in Europe. The product is available in 4mg and 8mg doses. Once placed on the tongue, it dissolves in a few seconds and is swallowed with saliva without the need for water. The innovative ODF form may reduce the patient pill burden and enable patients to take their medication virtually anywhere.

The product is indicated for radiotherapy induced nausea and vomiting (RINV), chemotherapy induced nausea and vomiting (CINV) as well as postoperative induced nausea and vomiting (PONV) in both adult and children of 6 month of age or older. The product has been formulated and developed using the RapidFilm drug delivery technology and is the form of a soluble film to be placed on the tongue where it dissolves in few seconds thus greatly improving patient compliance and avoiding possible risks of suffocation in kids.

The product is approved in Europe and Canada as prescription drug and it is marketed by Norgine B.V. and Takeda Pharmaceuticals respectively under license from APR.

Sentinox

APR’s novel nasal spray, Sentinox, is a Class III medical device intended to offer an additional protection against airborne viruses and bacteria and their transmission, included, but not limited to, SARS-CoV-2. Positive interim clinical data showing accelerated clearance of upper airway viral infection was recently reported for Sentinox in a randomized, controlled clinical trial.

While Sentinox is approved in the European Union, it is not being marketed, as we do not consider the set of approved claims to be sufficient to differentiate Sentinox from its competitors and offer a strong competitive advantage. As a result, we plan to start a confirmatory, controlled clinical trial in the prevention of viral and bacterial airborne infections in the fourth quarter of 2022. There can be no assurance that this trial, if undertaken, will be successful.

 

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Sentinox was certified in Europe on February 16, 2021 as a Class III Medical Device (Certificate No. EPT 0477.MDD21/4200.1). The device is intended for irrigation, cleansing and moistening of the nasal cavities and is indicated for the following uses: (i) reducing the risk of infections caused by bacteria and viruses, including SARS-CoV-2, by lowering the nasal microbial load; (ii) symptomatic nasal care; and (iii) nasal care in cases of minor lesions/alterations of the nasal mucosa.

On October 27th, 2021, we reported positive interim results from our clinical trial of nasal spray Sentinox in SARS-CoV-2 infected patients, confirming its safety and tolerability. We also reported that data from the study suggest that Sentinox could potentially be effective in reducing the SARS-CoV-2 viral load at the level of the nasal mucosa. Completion of the clinical study and issuance of the final report was expected sometime in the first quarter of 2022; in the meantime, we are assessing the commercial opportunity and currently evaluating a license of the commercial rights to third parties. Relief does not intend to market this product directly because it requires substantial sale force and commercial promotion in most of the countries.

On March 17, 2022, Relief and APR reported the final data from APR’s clinical trial of nasal spray, Sentinox, in SARS-CoV-2 infected patients. The post-market, interventional, randomized, controlled clinical study (NCT04909996, clinicaltrials.gov) enrolled 57 patients who were randomized to receive Sentinox treatment 0.5 ml into each nostril, performed 3 times/day or 5 times/day for 5 days as add-on to the standard therapy, vs. no Sentinox treatment group. The study was designed to assess the efficacy and safety of Sentinox spray in terms of viral load reduction, negativization and infectivity in recently infected SARS-CoV-2 individuals. It was conducted by the Hygiene Unit of IRCCS Policlinico San Martino Hospital in Genoa, Italy, and coordinated by Prof. Giancarlo Icardi.

Considering the small sample size and the high variability in the baseline viral load observed within study groups, the primary endpoint was not reached; however, the results of the study suggest the potential efficacy of Sentinox for 3 times/day, versus the control group, in the reduction of the nasal viral load, negativization and reduction of infectivity. The final analysis on the intention-to-treat (“ITT”) population of 54 patients who completed the study showed an about 90% (over 1.0 Log10) reduction of viral load after 5 days of treatment with Sentinox 3 times/day versus the control group.

Additional analyses have been conducted in patients stratified according to baseline value of RT-PCR cycles: in the subgroup with medium (Ct 20-30) viral load, the use of Sentinox significantly reduced the viral load of 1.9761 Log10 (p=0.0178) at day 5 compared to the control group, suggesting a positive trend in the treatment effect. Further efficacy analyses on the ITT population showed that negativization in the Sentinox 3 times/day group started at day 4; at day 6 patients with negative swab were almost two-fold compared to the control group (47% in Sentinox group versus 22% in no treatment group) (p=0.0005). Similar results were obtained in the analysis conducted in the 20-30 RT PCR cycles subpopulation.

Analysis on infectivity data was also conducted in the ITT population: patients were considered “not infectious” (patient likely not be able to spread virus to others) when the cycle threshold value of >35 cycles was achieved (Carrouel et al. 2021; Jang et al. 2021; Iwanami et al. 2021; Choudhuri et al. 2020). In the 3 times/day Sentinox group, 71% of patients were non-infectious versus 44% in the control group at day 6 (p<0.0001). Overall safety data monitored through clinical examination showed a good safety profile for Sentinox. This has been confirmed also by VAS and LIKERT scale results.

 

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APR TM-011

APR TM-011 is currently approved in EU as Class III Medical Device for the treatment of skin lesions and toxicities induced by certain cancer treatments, including certain anti Epidermal Growth Factor Receptors (anti-EGFR) Monoclonal Antibodies (e.g. Cetuximab). The use of anti-EGFR inhibitors cause papulopustular manifestations due to the interference of epidermal growth factor receptor (EGFR) signaling in the skin with a high risk of secondary infections. Subject to an internal commercial assessment, the company is planning to conduct an additional controlled clinical study in order to confirm product approval in Europe as Class III Medical Device beyond 2024 when the new EU regulations on such devices shall apply (the “MDR Regulation”). In particular, the company is planning to conduct a multi-center, post-market, double blind, exploratory placebo-controlled investigation to evaluate the efficacy (reducing occurrence of acute dermatitis of grade 3 or higher -RTOG scale), safety and tolerability of APR TM-011 in the management of skin lesions /reactions due to anti-EGFR Monoclonal Antibodies and/or radiotherapy-induced treatments in oncology patients.

This study would follow a preliminary, proof of concept study completed by the company on 15 head and neck cancer patients treated for 8-12 weeks with Cetuximab and showing a mean reduction of 94% of the lesion area compared to the standard of care.

APR-TD-011

Relief is planning to evaluate APR-TD-011 as a treatment for epidermolysis bullosa (“EB”). EB is a group of rare, genetic, life-threatening connective tissue disorders characterized by skin blistering throughout the body and the risk of severely impacting internal organs. It is estimated that the overall prevalence for EB could be as high as 95.61 per million in the U.S. with similar numbers in Europe, equating to approximately 25,000 patients in the U.S. and 40,000 in the European Union. APR-TD-011 is a proprietary formulation of hypochlorous acid sprayable solution that combines strong antimicrobial action with anti-inflammatory properties. APR-TD-011 utilizes the TECHLO patented technology platform and employs an exclusive combination of three physio-chemical properties – high-purity hypochlorous acid (“HCIO”), hypotonic low pH and high oxidation-reduction potential (“ORP”), which is believed to support a faster physiological healing of EB wounds by creating a favorable wound microenvironment. In particular, HCIO is well known as a broad-spectrum, fast acting antimicrobial agent, which reinforced by low pH and high ORP contributes to prevent and treat skin infections.

APR-TD-011 is an investigational drug candidate that, subject to clinical demonstration of efficacy and safety in clinical trials, could play an important role in the reduction of inflammation by inhibiting the NF-kB pro-inflammatory pathway and, at the same time, may offer a faster wound healing in EB patients and by reducing the itching and pain linked to infections and inflammation.

The product was granted Orphan Drug Designation in late 2019 by the U.S. FDA. Relief initiated a Phase 2 proof-of-concept study in September 2022 and plans to discuss further development steps with regulatory authorities shortly thereafter. In particular, the company is planning to conduct a single arm (12 patients with at least 24 matched wounds in total), placebo-controlled study to evaluate efficacy (wound healing in term of reduction of wound size and wound closure, change in pain and itching and reduction of wound infection ), safety and tolerability of APR-TD-011 in the management of open wounds in inherited EB patients (subtypes JEB, DEB, or Kindler syndrome). There can be no assurance this trial will be successful.

CAMBIA

Diclofenac potassium is an off-patent, potent non-steroidal anti-inflammatory drug (“NSAID”) widely used therapeutically for inflammatory conditions and pain management. By applying the patented dynamic buffering technology (“DBT”), APR developed the first, and still the only, NSAID ever approved by the FDA for the treatment of acute migraine attacks in adults — currently marketed as CAMBIA by Assertio Therapeutics Inc. in the U.S. and Miravo Healthcare (formerly Nuvo Pharmaceuticals Inc.) in Canada, under an exclusive, royalty bearing license agreement with APR.

 

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On February 28, 2022, Unimedica Laboratories Pvt. Ltd., India, sent APR a Notice of Certification under the FFDCA related to the filing of an ANDA for CAMBIA. While there can be no assurance, that it is unlikely that Unimedica will get accelerated approval, and in any case, we reserve the right to seek to enforce our patents.

DBT and CAMBIA are currently protected by a family of four patents listed in the FDA Orange Book, all expiring in 2026. In 2023, based on litigation settlements between Assertio and specific generic filers, generic versions at Cambia may become available. CAMBIA is currently available in the form of a dry powder packed into a single dose sachet to be poured and dissolved in water before administration.

VOLTADOL

Using the patented matrix patch technology, APR has developed a topical patch containing and delivering Diclofenac sodium, an off-patent, potent non-steroidal anti-inflammatory drug (“NSAID”) for the local treatment painful short term, acute conditions such as strains. The product is marketed in various countries as over the counter medicine by Glaxo Smith Kleine (GSK).

Unlike heat plaster, the patch contains an anti-inflammatory. It penetrates deep to the source of pain to provide powerful pain relief. The Medicated Patch provides up to two times more powerful deep down pain relief, compared to a non-medicated, non-heated placebo patch. The patch also provides 12 hours continuous release of the active ingredient (diclofenac) to the site of pain. This means the patch only needs to be applied once in the morning and once in the evening to provide effective pain relief.

RLF-100

Aviptadil is a synthetic form of Vasoactive Intestinal Peptide (“VIP”) consisting of 28 amino acids which was first discovered in 1970. Although initially identified in the intestinal tract, human VIP is now known to be produced throughout the body and to be primarily concentrated in the lungs. Here VIP has shown a multimodal mechanism of action: anti-inflammatory / Immunomodulatory, vasodilating effect, lung anti-proliferative and protective activity, bronchodilating effect and promotion of surfactant production. 70% of the VIP in the body is bound to a specific type of cell in the lung: the Alveolar Type II (“ATII”) cell, which is critical to the transmission of oxygen to the body.

In 1970, Nature published a short report entitled “Potent peripheral and splanchnic vasodilator peptide from normal gut,” authored by two young scientists working at the Karolinska Institute (Said, Mutt, 1970). Five decades of subsequent research documented VIP’s role as a potent natural anti-cytokine that has unique capability to block pathways of cell death in ATII cells – the cell targeted by the SARS-CoV-2 virus.

Acute respiratory failure is the primary cause of death in COVID-19. In some cases, the injury is attributed to cytokine storm – i.e. a massive release of inflammatory cytokines that then cause destruction of pulmonary epithelium cells. However, the cytokine storm is only produced after the SARS-CoV2 virus enters the ATII cell through binding of its spike protein to Angiotensin Converting Enzyme 2 (“ACE2”) surface receptors (Mason 2020). ACE2 is not present on Type I alveolar cells, which comprise 95% of the pulmonary epithelium hence those cells are not infected by the coronavirus. Similarly, only the ATII cell expresses the VPAC1 receptor to which VIP binds. VIP is shown to prevent their apoptosis in models of lung injury (Ao 2011, Pakbaz 1993). Hence, VIP represents a highly specific approach to rescuing the lung from the overwhelming failure of oxygenation seen in COVID-19.

 

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Pulmonary drugs are difficult to develop, given regulatory requirements for long-term toxicology studies in multiple species, including primates (Tepper 2016). FDA has asserted that these preclinical toxicology requirements must be observed in the case of candidate drugs to treat COVID-19. VIP, on the other hand, have successfully completed four species toxicology and safety pharmacology studies in both intravenous and inhaled dosage. Phase 2 trials in sarcoidosis (Prasse 2010), pulmonary hypertension (Petkov 2003, Leuchte 2008), pulmonary fibrosis (unpublished data), and asthma (Bundgaard 1983, Morice 1983 and 1986, Altiere 1984, Barnes 1984, Crimi 1988, Morice 1986) document that VIP has no major toxicities when inhaled at doses of 300µg/day or infused at dose of 6 pmol/kg/min.

VIP was first proposed as a modulator of lung inflammation by Said (Said 1988, 1991). It has demonstrated positive effects in clinical trials of sepsis-related ARDS (Youssef 2020 preprint) and Sarcoidosis (Prasse 2010).

Although named (or mis-named) for the intestinal tissue in which it was first isolated, VIP is produced by neuroendocrine cells throughout the body and by T-lymphocytes, B-lymphocytes, and macrophages. VIP is highly localized in the lung (Leys 1986, Virgolini 1995) but is a widely distributed that showed, in various models, effects in hemodynamics and coronary circulation (Feliciano 1998, Frase 1987, Henning 2001), kidney (Dimaline 1983, Calam 1983 and 1988), immune system (Gonzales-Rey 2007, Ganea 2015, Li 2013), intestinal tract (Iwasaki 2019) and reproduction (Fredericks 1983, Fraccaroli 2012).

Relief currently intends to initiate a phase 2b dose ranging study in 54 patients with pulmonary sarcoidosis using inhaled RLF-100® administered over a 12-week period, following which patients will have the option to participate in the extension phase. A pre-IND meeting with the U.S. Food and Drug Administration (FDA) is planned to confirm the efficacy and safety endpoints as well as the proposed dosing regimen and, based on a positive outcome, the trial is expected to begin during 2023. Finally, Relief recently announced promising three-month stability data on a new formulation of RLF-100® (aviptadil) and is evaluating the opportunity to file for additional patent protection regarding the product.

In early 2022, Biophore India Pharmaceuticals received emergency use approval for its own formulation of aviptadil for the treatment of COVID-19 from the Drugs Controller General of India. While such approval does not affect Relief’s application for approval elsewhere, it does substantiate the original hypothesis that RLF-100 is viable treatment for COVID-19 related ARDS.

Other indications for RLF-100

Beyond COVID-19, Relief’s is to evaluate RLF-100 as a treatment for respiratory failure and its complications in Intensive Care Units (“ICUs”).

Since RLF-100’s mechanism of action (“MoA”) is not restricted to the protection of ATII cells, beneficial effects could extend to other types of ALI where involvement of ATII cells is not the leading cause. Preclinical and pilot clinical data in sepsis-induced ALI support this view. Other forms of ALI where treatment with RLF-100 may hold promise include ALI due to other infectious agents. These other programs are likely to be viewed as risk-mitigated if the FDA determines that RLF-100 is safe and effective in treating COVID-19-induced ALI.

Pulmonary sarcoidosis

 

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On August 3, 2021, Relief announced that the FDA had granted Orphan Drug Designation for RLF-100 for the treatment of pulmonary sarcoidosis. On September 2, 2021, Relief reported that its German subsidiary, AdVita, has received regulatory clearance by the German Federal Institute for Drugs and Medical Devices, Bundesinstitut für Arzneimittel und Medizinprodukte (“BfArM”) to conduct a randomized, double-blind, multicenter clinical trial in sarcoidosis patients.

Relief intends to conduct a Phase 2b dose ranging study in 54 patients with pulmonary sarcoidosis using inhaled aviptadil administered over a 12 week period, following which patients will have the option to participate in the extension phase. A pre-IND FDA meeting is planned to confirm the efficacy and safety endpoints as well as the proposed dosing regimen.

Berylliosis

Chronic beryllium disease (CBD) is a clinical phenocopy of sarcoidosis with the important difference, that it is caused by inhalation of beryllium. CBD is considered an occupational disease and often causes a chronic, long-lasting disease with shortness of breath and cough and can be diagnosed by a beryllium-lymphocyte proliferation test (Be-LPT). Patients with chronic beryllium disease may benefit from inhalation of aviptadil. Presently the ex-vivo effect of aviptadil on mononuclear cells in the setting of chronic beryllium disease is being evaluated. Together with the results from the phase 2b sarcoidosis trial, these results would justify the therapeutic use of inhaled aviptadil in CBD and provide a rationale for the clinical trial design in this indication.

Checkpoint Inhibitor-induced Pneumonitis

Checkpoint inhibitor-induced pneumonitis (CIP), an indication in which Relief’s wholly owned subsidiary AdVita obtained method of use patent protection for aviptadil earlier this year. The use of inhaled aviptadil for this indication will be further evaluated in due course to explore whether such use could enhance compliance with chemotherapy and improve outcomes for cancer patients.

Non-COVID-19 related ARDS

Testing of RLF-100 in treatment of non-COVID-19 related acute respiratory distress syndrome (ARDS) with a particular focus on infectious ARDS is part of the future clinical development plans for aviptadil.

RLF-100 in COVID-19

When the COVID-19 pandemic began, Relief devised a plan of action to respond to one of the largest healthcare disasters of our time by rapidly advancing RLF-100 towards approval in COVID-19-induced acute lung injury. Through its multimodal mechanism of action, RLF-100 may uniquely target the pathways attacked by COVID-19, preventing acute lung injury (“ALI”).

 

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Phase 2b/3 clinical trial in COVID-19

On March 29, 2021, NeuroRx reported in a press release results of the phase 2b/3 double-blind, multicenter trial of intravenously administered ZYESAMI (aviptadil, RLF-100) for the treatment of respiratory failure in critically ill patients with COVID-19. According to NeuroRx, across all patients and clinical sites, RLF-100 met the primary endpoint for successful recovery from respiratory failure at days 28 (P = .014) and 60 (P = .013) and also demonstrated a meaningful benefit in survival (P = < .001) after controlling for ventilation status and treatment site. However, they also reported that the study did not demonstrate a statistically-significant difference on the study’s primary endpoint without statistical adjustment for these pre-specified covariates.

According to NeuroRx, in addition to the robust overall significance across all 196 treated patients at all 10 clinical sites, the prespecified analysis of recovery from respiratory failure is clinically and statistically significant in the 127 patients treated by High Flow Nasal Cannula (HFNC) (P = .02), compared to those treated with mechanical or non-invasive ventilation at tertiary care hospitals. In this subgroup, ZYESAMI patients had a 71% chance of successful recovery by day 28 vs. 48% in the placebo group (P = .017) and a 75% rate of successful recovery by day 60 vs. 55% in the placebo group (P = .036). 84% of HFNC patients treated at tertiary medical centers with RLF-100TM survived to day 60 compared with 60% of those treated with placebo (P = .007).

Recovery from respiratory failure (without relapse) with discharge from acute care and survival through the observation period was, still according to NeuroRx, the prespecified primary endpoint specified by FDA for the study, originally intended to be assessed at 28 days and then extended to 60 days based on recently-published FDA guidance. The above analysis were from a sample size of 196 participants who were randomized and treated in the placebo-controlled, double-blind clinical trial (www.clinicaltrials.gov, NCT04311697) conducted at ten U.S. hospitals. Treatment with ZYESAMI or placebo was in addition to standard of care treatment that included steroids, convalescent plasma, antiviral therapy, anticoagulants, and various anti-cytokine drugs.

 

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On June 1, 2021, NRx, which became NeuroRx’s parent corporation in May 2021 upon the completion of NeuroRx’s merger with Big Rock Partners Acquisition Corp., announced that NeuroRx had filed an application with the U.S. Food and Drug Administration (“FDA”) requesting Emergency Use Authorization (“EUA”) for ZYESAMI (Aviptadil-acetate), its version of aviptadil, to treat critically ill COVID-19 patients suffering with respiratory failure. Further, on or about August 31, 2021, NRx issued a press release announcing an additional finding in its Phase 2b/3 clinical trial investigating ZYESAMI for the treatment of patients with ARDS due to critical COVID-19. According to the press release, the new analysis shows that patients treated with ZYESAMI demonstrated improvement in blood oxygen, indicative of improved lung function, within a day of starting treatment.

On November 5, 2021, NRx announced that the FDA had declined EUA for the use of aviptadil for the treatment of acute respiratory failure due to critical COVID-19. In its press release, NRx stated that in the letter from the FDA denying EUA, the FDA noted that it has only reviewed safety data on 131 patients treated with aviptadil. NRx further announced in its press release that it will attempt to coordinate a review by the FDA of 150 or more additional patients treated with aviptadil through other trials. Additionally, NRx stated in its press release that the study’s Data Safety and Monitoring Board reviewing the trial found no safety issues. Further, on November 24, 2021, NRx reported that it was denied breakthrough therapy designation for the product.

On January 5, 2022, NRx issued a press release reporting that it has submitted an additional application to the FDA seeking EUA for the use of aviptadil to treat patients with critical COVID-19 who are at immediate risk for death from respiratory failure despite treatment with approved therapy, including Remdesivir. Additionally, on January 26, 2022, NRx issued a press release announcing, NeuroRx’s receipt of a first safety report from a southwestern hospital where physicians have administered aviptadil to patients with COVID-19 respiratory failure. According to NRx, the patients were treated under the United States’ Right to Try Act, which gives access to investigational medicines for patients who have been diagnosed with life-threatening diseases or conditions, who have tried all approved treatment options, and who are unable to participate in a clinical trial to access certain unapproved treatments. NRx’s press release stated that of the first 19 patients treated by December 31, 2021, three had died and sixteen (84%) were reported to be alive as of January 22, 2022. Further, according to the press release, 14 of these 16 patients had been discharged to a rehabilitation facility or to home. By way of comparison, according to “Clinical characteristics, risk factors and outcomes in patients with severe COVID-19 registered in the ISARIC WHO clinical characterisation protocol: a prospective, multinational, multicentre, observational study”, published in the journal ERJ Open Research in January 2021, the overall 28-day fatality rate for COVID-19 patients admitted to the ICU was approximately 30.7%. The press release also indicated that this use of aviptadil had occurred during the then-current COVID-19 surge caused by the omicron variant, although patients were not necessarily tested for the specific COVID variant that caused their ICU admission. Finally, NRx reported in its press release that no serious adverse events were reported. There can be no assurance that NeuroRx’s reapplication seeking EUA for aviptadil for the treatment of acute lung disease caused by COVID-19 will be successful.

On November 29, 2021, NRx issued a press release announcing the results of a subsequent statistical analysis it commissioned from Dr. David Schoenfeld, a statistician with expertise in life-threatening diseases of the lung. According to the press release, Dr. Schoenfeld analyzed the subgroup of patients in the Phase 2b/3 trial that remained in respiratory failure despite treatment with remdesivir and stated that the analysis identified a statistically significant (p=0.03) 2.5-fold increased odds of a patient having survived and being free of respiratory failure at 60 days (the primary endpoint) and a statistically significant (p=0.006) four-fold higher odds of 60-day survival among patients treated with ZYESAMI compared to those treated with placebo.

On March 3, 2022, two U.S. Senators and two members of the House of Representatives sent a letter to Dr. Robert Califf, Commissioner of the FDA, and Dr. Anthony Fauci, Director of the National Institute of Allergy and Infectious Disease regarding the results of the right-to-try administration of ZYESAMI. The letter discusses the results and seeks comment on the FDA review of the ZYESAMI EUA application and the FDA’s stance that the EUA will not be reviewed until the completion of clinical trials later this year. There can be no assurance as to what effect the letter will have on the review and consideration of the EUA application.

 

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The NCT04311697 trial is completed by an Expanded Access Protocol (SAMICARE NCT04453839), currently ongoing, aiming to include patient that were ineligible in the phase 2b/3 NCT04311697 trial in an open label study. On June 15, 2021, NRx announced in a press release positive data about the 240 patients (including those receiving palliative care) included in this protocol. Among the 196 patients receiving maximal intensive non-palliative care, 76% of those treated with HFNC were discharged from the hospital or were alive and in the hospital at day 28, compared to 54% of those treated with mechanical ventilation.

NeuroRx has also reported that it has initiated a trial with an inhaled formulation of aviptadil for the Treatment of Severe COVID-19 (AVICOVID-2 NCT04360096) aiming to prevent the progression to respiratory failure. However, NRx has reported that this trial has been cancelled.

NeuroRx Collaboration Agreement

On September 18, 2020, we entered into a binding collaboration agreement (the “Collaboration Agreement”) with NeuroRx.

The Collaboration Agreement establishes the terms under which we agreed to collaborate and work with NeuroRx in order to maximize revenues in our respective territories from the sale of RLF-100 for intravenous and inhaled use primarily in the treatment of COVID-19 related conditions. The NeuroRx territory includes the United States, Canada, and Israel. The Relief territory comprised the rest of the world and includes the European Union, Switzerland, Iceland, Norway, the United Kingdom, the Channel Islands, Liechtenstein, Monaco, Andorra, San Marino and Vatican City. The collaboration agreement provides that the collaboration is to be conducted on an exclusive basis and the parties have agreed not to develop or commercialize any drug product that may be competitive with RLF-100.

The Collaboration Agreement provides that we shall fund certain associated with the clinical trials and development of RLF-100 in the United States, which development will be conducted and managed by NeuroRx. NeuroRx is responsible for ensuring that the costs of the clinical trials and development activities for RLF-100 IV do not exceed the budget contemplated by the parties by more than 30%.

The Collaboration Agreement also provides options for the parties to treat health conditions outside COVID-19 and for the commercialization of RLF-100 outside of the above-described territories.

The Collaboration Agreement includes a non-exclusive list of assets that each party brought to the collaboration, including, but are not limited to:

 

Relief

  

NeuroRx

•  Funding for clinical trials, formulation and stability of RLF-100, and purchasing supplies for manufacture;

 

•  U.S. Patent No. 8,178,489, and related patents and corresponding foreign patents;

 

•  U.S. and European Union Orphan Drug Designations related to ARDS, sarcoidosis, and pulmonary hypertension;

 

•  EU-compliant toxicity file and preclinical data; and

 

•  Clinical phase 2 data from prior human trials conducted in the EU.

  

•  U.S. regulatory information;

 

•  Authorized application, and information included in, or pursuant to, United States IND 149,152 or United States IND 151,070 and related documents;

 

•  GCP clinical trial structures with multiple qualified data sites, data monitoring, institutional review boards, active protocols, and ongoing data collection;

 

•  Manufacturing and cGMP formulation and stability data for RLF-100; and

 

•  Qualification through SAMS and teaming agreements with BARDA-preferred partners.

 

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Under the Collaboration Agreement, Relief initially committed $8.3 million to fund a Phase 2b/3 clinical trial of the aviptadil IV product. Relief also agreed that it would fund an additional amount equal to 30% of the initial budget (aggregating with the initial budget a total of $10.9 million). Relief also loaned $500,000 to NeuroRx in March 2020, a loan that would not have to be repaid for two years – well after the then-anticipated commercialization date of the proposed aviptadil product, so that it had funds to operate. In total, Relief funded to the collaboration approximately $15.4 million (either to NeuroRx directly or to third-party vendors on NeuroRx’s behalf), plus the loan (which was made on very favorable terms). This loan was repaid in April 2022 pursuant to its terms.

Relief also was willing to consider funding more towards the aviptadil project, but NeuroRx was obligated to provide reasonable information to support why the additional funds were required. Dr. Javitt and NeuroRx demanded additional funds, but refused to provide the reasonable information requested by Relief to determine why the additional funds were required, despite repeated requests by Relief for documentation to support proposed additional charges. Relief also sought backup for the use of the funds already provided (to assess whether the funds delivered to NeuroRx had been used for the purposes for which they were provided), but NeuroRx refused to provide such information. When Relief sought to audit NeuroRx’s books and records to obtain the necessary information, as permitted under the Collaboration Agreement, NeuroRx and Dr. Javitt refused to allow Relief’s outside accountants to conduct the audit, despite repeated requests.

 

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Dispute and Litigation with NeuroRx

On October 7, 2021, because of the many breaches of the Collaboration Agreement by NeuroRx, we filed a lawsuit against NeuroRx and its Chief Executive Officer, Dr. Jonathan Javitt, for multiple breaches of the Collaboration Agreement (the “Complaint”). The Complaint was filed in the Supreme Court in the State of New York in Manhattan. Among the many alleged breaches of the Collaboration Agreement that were enumerated in the complaint are the following:

 

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failing to provide Relief with the full data set from NeuroRx’s recently completed phase 2b/3 clinical trial evaluating IV RLF-100 (aviptadil) for the treatment of acute respiratory failure due to COVID-19, which data and information are required to be provided to Relief by NeuroRx under the Collaboration Agreement and which data and information are required for Relief to seek approval to commercialize the product in Europe and by failing to collaborate with Relief so that Relief was provided meaningful input into NeuroRx’s U.S. development program;

 

   

failing to allow Relief, despite multiple requests, to conduct a forensic audit of NeuroRx’s books and records to determine how the funds that Relief provided to NeuroRx were actually used;

 

   

entering into multiple agreements relating to the development of the product subject to the collaboration without Relief’s consent, as required under the Collaboration Agreement;

 

   

engaging in commercialization efforts in territories outside the purview of NeuroRx’s territory under the Collaboration Agreement; and

 

   

developing additional COVID-19 treatments in violation of the exclusivity provisions of the Collaboration Agreement.

The suit also alleged, among other matters, breaches of the covenant of good faith and fair dealing and tortious interference with prospective economic advantage.

The Complaint, among other remedies, sought damages, an order compelling NeuroRx to comply with multiple provisions of the Collaboration Agreement, and a declaration directing NeuroRx to deliver the entire data set from the Phase 2b/3 clinical trial of intravenously-administering aviptadil to Relief.

On January 10, 2022, NeuroRx, filed a complaint against Relief in the Supreme Court of the State of New York in Manhattan. In its complaint, NeuroRx makes numerous allegations, including the following:

 

   

NeuroRx claimed that Relief breached the Collaboration Agreement by refusing to make required payments thereunder.

 

   

NeuroRx claimed that by failing to pay what they allege is due , Relief repudiated the Collaboration Agreement and NeuroRx was no longer bound thereby.

 

   

NeuroRx claimed that Relief has defamed NeuroRx through its statements regarding NeuroRx’s breaches of the Collaboration Agreement and other matters, claiming that Relief knew that such statements were recklessly made and/or knowingly false.

In the complaint, NeuroRx claimed damages in excess of $185 million and sought a ruling that the Collaboration Agreement is void.

 

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On January 12, 2022, NRx issued a press release about NeuroRx’s complaint. In the press release, NRx made several additional claims about Relief, which we responded to in a press release on January 14, 2022:

 

   

While NeuroRx claims in its press release that the Collaboration Agreement has been cancelled, we have started that we continue to believe that the Collaboration Agreement remains in full force and effect, and that NeuroRx, not Relief, is in breach of that agreement.

 

   

NeuroRx’s press release included numerous statements that we believe to be false and materially inaccurate. Among others, these include statements made in the press release regarding the formulation of aviptadil that is the subject of the Collaboration Agreement. We assert that the statements in the NRx press release to the effect that we are misleading the public and our shareholders in our public statements and regulatory filings are false and defamatory.

 

   

The press release discusses a damages calculation that we believe to be completely illogical and unsupported and makes claims, which we believe to be inaccurate and misleading, to the effect that our conduct was so egregious as to warrant the imposition of punitive damages. It is our belief that, to the contrary, it is NeuroRx’s conduct that warrants the imposition of punitive damages.

 

   

The press release also makes allegations regarding our Chairman, Ram Selvaraju, that are false and defamatory. Contrary to the claims made in the press release, no members of Relief’s board of directors are criminals or have been incarcerated, and we believe that the statements made in the press release, and Jonathan Javitt’s statements in multiple posts on investor message boards regarding this topic, are false and defamatory as to Relief and its board and management.

On August 22, 2022, Relief and NRx issued a press release announcing that they had agreed to a tentative settlement of the pending litigation. The parties announced that they had agreed to work collaboratively to finalize the settlement within the next thirty days. Further, the parties announced that they had agreed to stay the litigation for an additional sixty days to allow for the negotiation and execution of the definitive settlement agreement and related terms. This litigation stay was later extended to November 11, 2022.

On November 14, 2022, Relief and NRx issued a press release announcing that the parties had entered into a definitive settlement agreement to resolve all matters relating to the pending litigation. At the closing of this settlement, held on December 19, 2022, (i) NRx transferred to Relief all of the assets that it previously used in its aviptadil development program, including its regulatory filings, patent applications, clinical data, and the formulation of the aviptadil product it was previously developing, (ii) Relief has the exclusive right and control going forward to develop and commercialize an aviptadil product, (iii) Relief has agreed to use commercially reasonable efforts to continue the existing Right to Try Program for aviptadil in the United States for at least 2 years, (iv) Relief will pay NRx milestone payments if it can successfully obtain commercial approval of an aviptadil product (whether for COVID-19 or any other indication), (v) Relief will pay NRx royalties based on a percentage of future sales of an aviptadil product (whether for COVID-19 or any other indication), up to a maximum of $30 million in the aggregate, (vi) NRx Pharmaceuticals has agreed not to compete in the development of an aviptadil product in the future, and (vii) at the closing, Relief and NRx Pharmaceuticals dismissed their pending litigation. Further, the Collaboration Agreement between Relief and NeuroRx was cancelled.

Patents and Licenses

Our success depends significantly on our ability to develop, obtain and maintain intellectual property rights for our product candidates, technology and know-how, to operate without infringing intellectual property rights of others and to prevent others from infringing our intellectual property rights. We seek to protect our proprietary position by, among other methods, filing patent applications in Europe, the United States and other relevant jurisdictions related to our proprietary technology, inventions and improvements that are vital to the development of our business, where patent protection is available. We also rely on trade secrets, know-how and in licensing opportunities to develop and maintain our proprietary position.

ACER-001 License

We in-licensed from Acer the rights to commercialize ACER-001 for the treatment of UCD and MSUD. Under the terms of our collaboration agreement, Acer received approximately $10 million cash payment (originally $14 million, offset by repayment of the $4 million outstanding balance of the prior loan, plusinterest, from Relief to Acer). Relief has also paid Acer $20 million in U.S. development and commercial launch costs for the UCDs and MSUD indications. Acer will retain development and commercialization rights in the U.S., Canada, Brazil, Turkey, and Japan. The companies will split net profits from Acer’s territories 60%:40% in favor of Relief. In addition, Relief has licensed the rights for the rest of the world, where Acer will receive from Relief a 15% royalty on all revenues received in Relief’s territories. Acer may also receive a total of $6 million in development milestone payments following the first European (EU) marketing approvals for UCDs and MSUD.

If ACER-001 is approved for marketing, Acer intends to submit the patent for listing by the FDA in the Approved Drug Products with Therapeutic Equivalence Evaluations, or Orange Book.

In parallel with Acer’s actions, Relief and Acer are pursuing similar claims in the European Patent Office to cover ACER-001 as Relief continues to execute on its plan to submit a Marketing Authorization Application for ACER-001 for the treatment of patients with UCDs in Europe in the second or third quarter of 2022. There can be no assurance that Relief and Acer will be successful in those endeavors.

Acer maintains its own intellectual property portfolio. In August 2014, Acer was granted Orphan Drug Designation by the U.S. Food and Drug Administration to sodium phenylbutyrate (ACER-001) for the treatment of Maple Syrup Urine Disease, and it has also been granted Orphan Drug Designation by the European Medicines Association.

As of the date of this registration statement, Acer’s patent portfolio for ACER-001 consists of three patent families. The first family includes 41 granted patents world-wide directed towards novel sodium phenylbutyrate particle formulations and methods of use. These patents have an expiration date of October 2036, exclusive of any patent term adjustments or extensions, or any form of potential exclusivity. If granted, additional patents, would expire no earlier than October 2036. Acer’s patent portfolio further includes PCT/US2021/040760 and PCT/US2022/040082. Patents granting from applications claiming priority to PCT/US2021/040760 will expire in July 2041, excluding any patent term adjustments or extensions, or any form of potential exclusivity. Patents granted from applications claiming priority to PCT/US2022/040082 will expire in April 2042, excluding any patent term adjustments or extensions, or any form of potential exclusivity

 

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ACER-001’s patents and patent applications worldwide are as follows:

 

Summary Description of Patent

Application

  

United States or Foreign

Jurisdiction

  

Expiration Date

Palatable Compositions Including Sodium Phenylbutyrate and Uses Thereof   

Granted: United States (Patent Nos. 11,154,521, 11,202,767, and 11,433,041), Albania, Austria, Belgium, Bulgaria, Switzerland, Cyprus, Czechia, Germany, Denmark, Estonia, European Patent Convention, Spain, Finland, France, United Kingdom, Greece, Croatia, Hungary, Ireland, Iceland, Italy, Lithuania, Luxembourg, Latvia, Monaco, North Macedonia, Malta, Mexico, Netherlands, Norway, Poland, Portugal, Romania, Serbia, Sweden, Slovenia, Slovakia, San Marino

 

Pending: Bahrain, Brazil, Canada, European Patent Convention, Israel*, Japan, Republic of Korea, Kuwait, Mexico, New Zealand*, Oman, Qatar, Saudi Arabia, United Arab Emirates

   October 17, 2036. Expiration of pending applications to be determined upon grant.
Administration of Sodium Phenylbutyrate in a Fasted State to Treat Urea Cycle Disorders    Pending: Patent Cooperation Treaty    Applications claiming priority to this PCT application, if granted, will expire no earlier than July 7, 2041.
Dosage Form for Improving Palatability of Drug Substance    Granted: China Pending: China, Patent Cooperation Treaty    August 24, 2031 (China). Applications claiming priority to the PCT application, if granted, will expire no earlier than April 12, 2042.

 

*

Two Patent Applications

 

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Aviptadil patents

Relief holds patents covering potential formulations of aviptadil in the United States valid until at least July 2029, with extension opportunities up to five years, as well as in several countries in Europe and the rest of the World valid until at least 2026, excluding extension opportunities comparable to the U.S. The existing patent family was filed in 2006 and granted in 2011 and 2012, as follows:

 

Summary Description of Patent

  

United States or Foreign

Jurisdiction

  

Expiration Date

Formulation for Aviptadil    United States (No. 8,178,489), China, European Patent Convention, Mexico, India, Austria, Denmark, Switzerland/Lichtenstein, Germany, Spain, United Kingdom, Ireland, Netherlands, Turkey    July 3, 2029 (United States), March 7, 2026 (all other jurisdictions)

AdVita

As of the date of this registration statement, AdVita has three patent families in various stages of prosecution. The first family includes 1 granted patent and 15 applications world-wide claiming priority to PCT/EP2020/062420. Patents granting from applications claiming priority to PCT/EP2020/062420 will expire in May 2040, excluding any patent term adjustments or extensions, or any form of potential exclusivity. The second family includes 15 applications world-wide claiming priority to PCT/EP2021/052151. Patents granted from applications claiming priority to PCT/EP2021/052151 will expire in January 2041, excluding any patent term adjustments or extensions, or any form of potential exclusivity. The last family includes an unpublished application. Each family of applications is directed to novel uses and/or formulations of Aviptadil for treating various conditions such as drug-induced pneumonitis. Advita’s patents and patent applications worldwide are as follows:

 

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Summary Description of Patent

Application

  

United States or Foreign

Jurisdiction

  

Expiration Date

Patent Family 1      
Vasoactive Intestinal Peptide (VIP) for Use in the Treatment of Drug-Induced Pneumonitis    United States (Application No. 17/595,025), Australia, Brazil, Canada, Switzerland, China, European Patent Convention, Hong Kong, Israel, Japan, Republic of Korea, Mexico, New Zealand, Russian Federation, Singapore, South Africa    May 5, 2040 (Switzerland) Applications, if granted, will expire no earlier than May 5, 2040.
Patent Family 2      
Human Anti-Inflammatory Peptides for the Inhalatory Treatment of Inflammatory Pulmonary Diseases    United States (Application No. 17/759,559), Australia, Brazil, Canada, China, European Patent Convention, Hong Kong, Israel, India, Japan, Republic of Korea, Mexico, New Zealand, Singapore, South Africa    Applications claiming priority to this PCT application, if granted, will expire no earlier than Jan 29, 2041.
Patent Family 3      
**Unpublished**    Patent Cooperation Treaty    Expiration of any potential applications claiming priority to this PCT application to be determined upon grant.

Partner patents and licenses

Tehclo Technology

As of the date of this registration statement, APR’s TECHLO portfolio consists of four patent families. The first three families include 107 granted patents world-wide directed to systems and methods for generating APR’s hypochlorous acid solution, compositions comprising APR’s hypochlorous acid solution, and methods for treating ocular disorders. These patents expire between October 2026 and June 2030, exclusive of any patent term adjustments or extensions, or any form of potential exclusivity. If granted, additional patents, would expire no earlier than July 2040.

 

Summary Description of Patent

Application

  

United States or Foreign

Jurisdiction

  

Expiration Date

Patent Family 1      
Electrolytic Water Treatment Device Having Sintered Nanoparticle Coated Electrode and Method for Making Acid or Basic Water Therewith    United States (Patent No. 8,277,634)    August 23, 2029

 

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Summary Description of Patent

Application

  

United States or Foreign

Jurisdiction

  

Expiration Date

Device Comprising an Electrode with Nanocoating for Preparing a Highly Stable Aqueous Solution and Method for Making this Aqueous Solution    Austria, Belgium, Bulgaria, Switzerland, Switzerland, Cyprus, Czechia, Germany, Denmark, Estonia, European Patent Convention, Spain, Finland, France, United Kingdom, Greece, Hungary, Ireland, Iceland, Italy, Lithuania, Luxembourg, Latvia, Monaco, Netherlands, Poland, Portugal, Romania, Sweden, Slovenia, Slovakia, Turkey    October 24, 2026 (Luxembourg), October 23, 2026 (all other jurisdictions)
New Highly Stable Aqueous Solution, Electrode with Nanocoating for Preparing the Solution and Method for Making this Electrode    Australia, Canada, China, Israel, Mexico, Republic of Korea, New Zealand, Russian Federation, Singapore, South Africa    October 23, 2026
A Device for the Electrolytic Treatment of a Fluid    India    October 23, 2026
Patent Family 2      
Highly Stable Electrolytic Water with Reduced NMR Half Line Width    United States (Patent Nos. 8,709,495, 9,402,192, and 9,889,153), Austria, Australia, Belgium, Bulgaria, Brazil, Canada, Switzerland, Cyprus, Czechia, Germany*, Denmark, Estonia, European Patent Convention*, Spain*, Finland, France*, United Kingdom*, Greece, Croatia, Hungary, Ireland, Iceland, Italy*, Japan, Republic of Korea, Lithuania, Luxembourg, Latvia, Monaco, Malta, Mexico, Netherlands, Norway, New Zealand, Poland*, Portugal, Romania, Russian Federation, Sweden, Singapore, Slovenia, Slovakia, Turkey*, South Africa    February 7, 2030 (United States Patent No. 8,709,495), April 24, 2028 (one United Kingdom patent), April 26, 2028 (Greece), April 25, 2028 (all other patents and jurisdictions)
  

*  Twopatents

  
Electrolytic Acid Water    India    April 25, 2028
Patent Family 3      
Methods of Treating Outer Eye Disorders Using High ORP Acid Water and Compositions Thereof    United States (Patent No. 8,691,289), Germany, European Patent Convention, Spain, France, United Kingdom, Italy, South Africa    June 15, 2030 (United Kingdom), March 13, 2032 (United States), June 16, 2030 (all other jurisdictions)
Patent Family 4      
Therapeutic Uses of Oxidising Hypotonic Acid Solutions    United States (Application No. 17/597,220), United Arab Emirates, Australia, Brazil, Canada, China, Colombia, Egypt, European Patent Convention, Israel, Japan, Korea, Kuwait, Qatar, Russian Federation    Applications, if granted, will expire no earlier than July 2040.

 

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APR has granted worldwide licenses for TECHLO to numerous regional and national pharmaceutical firms. None of the licenses, either individually or as a whole, currently represent a material amount of the revenues of the consolidated company.

Physiomimic Technology - GOLIKE

As of the date of this registration statement, the GOLIKE portfolio consists of two patent families including 37 pending applications and 47 granted patents world-wide. Patents resulting from these families, if granted, will expire no earlier than 2036 and 2038, respectively, exclusive of any patent term adjustments or extensions, or any form of potential exclusivity.

 

Summary Description of Patent

Application

  

United States or Foreign

Jurisdiction

  

Expiration Date

Patent Family 1      
Modified Release Orally Administered Amino Acid Formulations   

Granted: United States (Nos. 10,500,180 and 11,419,837), Armenia, Austria, Australia, Azerbaijan, Belgium, Bulgaria, Belarus, Switzerland, China, Colombia, Czechia, Germany, Denmark, Eurasian Patent Convention, European Patent Convention, Spain, Finland, France, United Kingdom, Greece, Croatia, Hungary, Indonesia, Ireland, Israel, Italy, Jordan, Kyrgyzstan, Kazakhstan, Lebanon, Lithuania, Malta, Mexico, Malaysia, Norway, Netherlands, Poland, Portugal, Romania, Russian Federation, Sweden, Slovenia, Slovakia, Tajikistan, Turkmenistan, Turkey, Taiwan

 

Pending: United States (Application No. 17/660,999), Argentina, Australia, Brazil, Canada, Chile, China, Egypt, European Patent Convention, Gulf Cooperation Council, Hong Kong*, Israel, Iraq, Macao, Malaysia, Philippines, Pakistan, Saudi Arabia, Uruguay, Venezuela, Vietnam, South Africa

  

September 25, 2036 (Jordan), September 28, 2036 (Taiwan), September 27, 2036 (all other jurisdictions).

 

Applications, if granted, will expire no earlier than September 27, 2036.

  

*  TwoApplications

  
Patent Family 2      
Methods of Normalizing Markers of Amino Acid Metabolism    Pending: United States (Application No. 16/543,437)    Expiration of pending application to be determined upon grant.
Methods of Normalizing Amino Acid Metabolism    Pending: Australia, Brazil, Canada, Chile, China, Colombia, European Patent Convention, Hong Kong, Israel, Iraq, Pakistan, Saudi Arabia, Taiwan    Expiration of pending applications to be determined upon grant.

 

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APR has granted licenses for GOLIKE® in Spain, the United Kingdom, Ireland, Brazil, Israel, Colombia, Panama, Peru, the Dominican Republic, and the Netherlands. None of the licenses, either individually or as a whole, currently represent a material amount of the revenues of the consolidated company.

Dynamic Buffer Technology - Diclofenac

As of the date of this registration statement, APR’s diclofenac patent portfolio consists of multiple patent families comprising 49 granted patents world- wide, with expiration dates in either between 2026 and 2040, exclusive of any patent term adjustments or extensions, or any form of potential exclusivity. The portfolio further includes 14 pending applications directed to new diclofenac formulations and methods of use. If granted, patents resulting from these pending applications will expire between 2026 and 2041, exclusive of any patent term adjustments or extensions, or any form of potential exclusivity.

 

Summary Description of Patent or

Patent Application

  

United States or Foreign

Jurisdiction

  

Expiration Date

Patent Family 1      
Diclofenac Formulations and Methods of Use   

Granted: United States (Nos. 7,759,394, 8,097,651, 8,927,604 and 9,827,197), Australia, Canada*, Switzerland*, Germany**, European Patent Convention***, Spain*, France*, United Kingdom*, Greece*, Indonesia, Italy**, Jordan, Republic of Korea, Lebanon, Malta, Mexico, Norway, New Zealand, Pakistan, Poland, Portugal, Russian Federation, Turkey, South Africa

 

Pending: United States (Application No. 16/716,511), China, Egypt, Gulf Cooperation Council*, Hong Kong, Thailand

   June 16, 2026 (all United States Patents), June 8, 2026 (Lebanon), June 14, 2026 (Malta), June 15, 2026 (United Kingdom), June 16, 2026 (all other jurisdictions). Expiration of pending applications to be determined upon grant.

 

*

Two Patents

**

Three Patents

***

Four Patents

 

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Summary Description of Patent or

Patent Application

  

United States or Foreign

Jurisdiction

  

Expiration Date

Diclofenac Formulations    Granted: Germany, Spain, France, United Kingdom, Italy    June 15, 2026 (United Kingdom), June 16, 2026 (all other jurisdictions).
Patent Family 2      
Moisture Resistant Container Systems for Rapidly Bioavailable Dosage Forms    Granted: United States (Nos. 7,700,125 and 8,097,267)    February 7, 2026 (No. 8,097,267), October 11, 2026 (No. 7,700,125).
Patent Family 3      
Substantially Sodium Free Diclofenac Potassium Oral Solutions   

Granted: United States (No. 11,123,318)

 

Pending: United States (Application No. 17/463,154), European Patent Convention

   January 27, 2038 (United States Patent No. 11,123,318). Expiration of pending application to be determined upon grant.
Patent Family 4      
Ready to Use Diclofenac Stick Packs   

Granted: United States (No. 11,260,026)

 

Pending: United States (Application No. 17/584,212), European Patent Convention, Hong Kong

   February 22, 2040 (United States Patent No. 11,260,026). Expiration of pending applications to be determined upon grant.
Patent Family 5      
Bioavailable Sugar-Based Diclofenac Formulations    Patent Cooperation Treaty    Expiration of pending applications to be determined upon grant.

APR has licensed Diclofenac to Assertio Therapeutics for its Cambia® product and to Novartis for its Voltaren® product. APR has also entered into a partnership agreement with Fidia Farmaceutici S.p.A. for diclofenac patches, and recognizes revenue of approximately CHF 1.3 million, CHF 900,000 and CHF 300,000, respectively, for each of those agreements on an annual basis. APR has also entered into License and Supply Agreements with MerckleGmbH and Zentiva k.s. and recognizes revenue of approximately CHF 423,000 and CHF 224,000, respectively, from those agreements on an annual basis.

APR sold the IT Patent for Diclofenac Patent Family 3 to Neilos s.r.l. (an affiliate of Shedir Pharma Group S.p.A), and the corresponding EP application to Dymalife Pharmaceutical S.R.L. (another affiliate of Shedir Pharma Group S.p.A.), but retained a non-exclusive and perpetual license right on such patent and patent for the production in the respective countries of drops solution for oral administration containing Diclofenac Potassium as sole active ingredient in a concentration of 5%. The Company believes that the sale of these properties will not have an effect on the license and supply agreements described in this section.

 

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APR received a sublicense right in the territory of United States and China from Fidia Farmaceutici in relation to the following patents owned by IBSA Farmaceutici on Diclofenac transdermal patch:

 

   

Chinese Patent No. CN101001616B;

 

   

U.S. Patent No. 10,328,034.

APR does not believe that this license agreement is material to its business.

Oral Disposable Film - Ondansetron

As of June 13, 2022, APR’s ondansetron patent portfolio consists of two patent families comprising 2 pending applications and 6 granted patents with expiration dates ranging from 2027 to 2031, exclusive of any patent term adjustments or extensions, or any form of potential exclusivity.

 

Summary Description of Patent or

Patent Application

  

United States or Foreign

Jurisdiction

  

Expiration Date

Patent Family 1      
Non-Mucoadhesive Film Dosage Forms    United States (Patent Nos. 8,580,830 and 9,682,037), Canada, Republic of Korea    November 22, 2029 (United States Patent No. 8,580,830), October 2, 2027 (All other patents)
Patent Family 2      
Fast Dissolving Drug Delivery Systems    Granted: Russian Federation, South Africa Pending: Brazil, Egypt    March 23, 2031. Expiration of pending applications to be determined upon grant.

 

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APR has granted a license right on the abovementioned patents and patent applications to Takeda in Canada. This license does not represent a material amount of our revenues.

Other APR IP

In addition to the patents and applications described above, APR has several other pending applications and granted patents:

 

   

U.S. Patent No. 8,039,024, entitled “Device and composition for the delivery of a preservative-free balsamic cream” and patents in Canada, Russia and Ukraine entitled “Adhesive Label with Bittering Agent and Fluidifying Agents for Natural Airway Secretions” claim and cover a preservative-free, OTC decongestant stick pack which is no longer marketed, other than in Mexico, where it is marketed by Pisa Laboratories under the brand name “Agrifen”. Sales of this product are not material.

 

   

PCT/IB2021/058174 related to dermal compositions, entitled “Dermal Compositions Replicating the Vernix Caseosa”, cover and claim OTC formulations targeting atopic dermatitis as well as other moderate skin disorders. Patents granted from applications claiming priority to this PCT application will expire no earlier than September 8, 2041. A corresponding Italian priority application will, if granted, expire no earlier than September 8, 2040.

 

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Manufacturing and supply

We do not own or operate facilities for the manufacture, packaging, labeling, storage or distribution of preclinical or clinical supplies of any of our drug candidates. We instead contract with and rely on third-party CMOs to manufacture, package, label, store test and distribute all preclinical development and clinical supplies of our drug candidates, and we plan to continue to do so for the foreseeable future. APR maintains laboratories for the testing of its products. Such laboratories are also used to develop new formulations.

Compliance with governing rules and quality requirements

The facilities used by our collaboration partners and CMOs to manufacture our product candidates are systematically audited by local authorities and occasionally inspected by competent authorities where the clinical studies are ongoing. The facilities where the commercial productions are performed must be approved by the FDA or other relevant regulatory authorities, pursuant to inspections that are conducted after we submit our NDA or comparable marketing applications. We perform periodic quality audits of the manufacturing facilities and CMOs to monitor their compliance with the regional laws, regulations and applicable cGMP standards and other laws and regulations, such as those related to environmental health and safety matters. The scope of our audits also involves monitoring the ability of our providers to maintain adequate QCs and QA systems including personnel qualification.

After manufacturing, our products are submitted to extensive characterization and QC testing plans performed by using properly developed analytical methods that are qualified or validated; this ensures the accuracy of the results generated and provides evidence of the quality of our products. In addition, our products are submitted to detailed and standardized stability programs aimed at demonstrating product stability during the storage period; this, in addition to guaranteeing the safety of the products, supports the definition of a suitable supply chain that may encompass the distribution of the products in different continents.

Contractual framework

We have established, with CMOs supplying drug substances or drug products under cGMP, quality agreements and master service agreements. Quality agreements define the quality standards required to develop, produce and supply the product, and also define the responsibilities related to the collaboration with regards to the quality related aspects. Manufacturing service agreements define the commercial and financial framework under which product manufacturing under cGMP is performed. Any failure to achieve and maintain compliance with the laws, regulations and standards, suspension of the manufacturing of our product candidates or revoke of cGMP permissions, which would adversely affect our business and reputation, are defined in the master service agreements and quality agreements. The risk that any third-party providers may breach the agreements they have with us because of factors beyond our control and the possibility that they may also terminate or refuse to renew their agreements because of their own financial difficulties or business priorities, potentially at a time that is costly or otherwise inconvenient for us, is managed by us with constant investments toward maintaining reserve stocks and in-depth process know-how.

Interaction with collaboration partners and CMOs

Finally, our partnership with CMOs is managed through an efficient project management platform in which teams are formed with the representatives of each key function from both parties. Meetings occur either through telephone conferences aimed at updating short-term actions or face-to-face conferences when mid- to long-term development plans are discussed.

 

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Acquisition of APR Applied Pharma Research SA

On April 30, 2021, we entered into a binding term sheet with the then current shareholders of APR Applied Pharma Research SA, a privately held Swiss company with over 25 years of experience in identifying developing and commercializing known molecules engineered with drug delivery systems in niche and rare diseases, to acquire all of the outstanding shares of APR. Under the term sheet, APR shareholders were to receive CHF 22 million in cash (plus or minus APR’s working capital adjustment), plus CHF 50 million payable in Shares. APR’s shareholders would also be eligible to receive contingent payments in the form of a combination of cash and Relief registered ordinary shares upon achievement of pre-arranged contingent milestones. Further, APR had the right to designate an individual to stand for election as APR’s designee at Relief’s Annual General Meeting of Shareholders of June 18, 2021, and, it designated its CEO Paolo Galfetti for that purpose, who was appointed to the Board of Directors of Relief on June 18, 2021.

On June 28, 2021, the former shareholders of APR and Relief signed and closed a definitive agreement for Relief to acquire all outstanding shares of APR. Under the terms of the agreement APR’s shareholders have received from Relief CHF 21.5 million in cash and 206,786,784 Consideration Shares at a value of CHF 45 million when the Consideration Shares were issued and listed. The APR shareholders were also eligible to receive possible future contingent milestone payments in the aggregate maximum amount of up to CHF 35 million, upon achievement of pre-agreed objectives involving (i) the execution of a definitive agreement for the commercialization of Sentinox (as such product is defined below), (ii) the launch of Sentinox in the first of France, Germany, Spain, Italy, and the United Kingdom, (iii) the launch of GOLIKE in the U.S., and (iv) the launch of APR-TD011 (as such product is described below) in the first of France, Germany, Spain, Italy and the United Kingdom. The launch of PKU GOLIKE® in the U.S. on October 10, 2022 marked the completion of the third milestone, for which Relief issued a cash payment of CHF 2.8 million as well as 150,200,120 shares.

Acquisition of AdVita Lifescience GmbH

On July 28, 2021, we announced the closing of a definitive agreement to acquire all of the outstanding shares of AdVita Lifescience GmbH. Under the agreement, the stockholders of AdVita received 135,741,063 of our ordinary shares, representing €25 million (approximately CHF 27.4 million) in value based on a 60-day Volume Weighted Average Price of our ordinary shares and are also eligible to receive additional contingent payments of up to €20 million (approximately CHF 21.9 million) in cash upon achievement of pre-agreed milestones involving (i) the issuance of a patent based on AdVita technology as set forth in the agreement, (ii) upon the first regulatory approval in the U.S. or Europe for the inhaled form of aviptadil for the prevention or therapy of acute respiratory distress system (ARDS) or acute lung injury (ALI), (iii) upon regulatory approval in the U.S. or Europe for the inhaled form of aviptadil for the treatment of sarcoidosis or berylliosis, and (iv) the identification of a partner for co-development or the start of a phase II clinical trial for checkpoint inhibitor-induced pneumonitis. In April 2022, we made an initial milestone payment of €5 million (approximately CHF 5.1 million) upon completion of the first milestone.

AdVita was founded in 2019 for the purpose of developing products and strategies to improve the therapy and diagnosis of rare lung diseases. Among AdVita’s assets are intellection property rights that may cover RLF-100 inhaled formulation specifications and the potential application of inhaled Aviptadil in the treatment of Acute Respiratory Distress Syndrome, Checkpoint Inhibitor-induced Pneumonitis and Sarcoidosis.

 

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Collaboration Agreement with InveniAI LLC

On November 24, 2021, we announced that we had entered into a collaboration agreement with InveniAI LLC (“InveniAI”), a U.S. based company that has pioneered the application of artificial intelligence and machine learning across biopharma and other industries, in order to identify promising drug candidates to treat rare and specialty diseases (the “InveniAI Collaboration Agreement”).

Under the terms of the InveniAI Collaboration Agreement, InveniAI will use its proprietary platform for the identification of potential pharmaceutical product opportunities using its Pharma Big Innovation Data Lab, consisting of (i) its proprietary AlphaMeld platform, a cloud-based artificial intelligence platform that uses its proprietary machine learning and deep learning based neural networks to identify product opportunities in therapeutic areas, (ii) its cross-functional teams at its Integrated Center of Excellence, and (iii) domain expertise, to generate novel pharmaceutical opportunities and the related development pathway for the development of such concepts.

In the collaboration it is expected that InveniAI will use its platform to navigate the volume of data for all regulatory agency approved drugs and their associated active ingredients to identify potential rate and specialty disease indications for development and commercialization by us (“product concepts”) . InveniAI will seek to prioritize top product concepts, associated diseases, scientific packages and evidence to support the potential drug development opportunities by us. We anticipate that InveniAI’s platform will complement APR’s existing capabilities in research and development and in drug reformulation. Based on product leads developed by InveniAI, we hope to develop proprietary versions of existing drugs, and to protect those drugs with long-lived intellectual property and defensible product claims.

Under the terms of the InveniAI Collaboration Agreement, we paid InveniAI an initial up-front fee of $500,000. We will be required to pay success milestones for any products brought to us in connection with the InveniAI Collaboration Agreement ranging from $200,000 per product candidate for which we exercise our option to acquire IP rights to $50 million for any required product reaching $1 billion per year in net sales. We will also be required to pay royalties on any such commercialized product in certain countries a royalty of approximately 3%.

We are not currently developing any product brought to us by InveniAI, and there can be no assurance that our collaboration with InveniAI will result in the development of new product candidates or product concepts.

Regulation in the United States

The Company assumes that some of its product candidates will be submitted under New Drug Applications (“NDA”) and that approval of not only the products but also their manufacture is required before starting to market them. According to the definition of the U.S. Code of Federal Regulations, a drug product is approved only after demonstrating that it meets standards that assure the product’s safety, purity, effectiveness and potency.

The design, pre-clinical and clinical study, manufacture, labeling, packaging, storage, holding, sale, distribution, marketing, and promotion of pharmaceutical products – including biologic products – are subject to extensive and rigorous government regulation. The Federal Food, Drug, and Cosmetic Act (“FFDCA”) and other federal and state statutes and regulations govern or influence these activities. Non-compliance with applicable requirements can result in fines, recall or seizure of products, total or partial suspension of production and/or distribution, refusal of the government to enter into supply contracts or to approve NDAs, civil penalties and criminal prosecution.

 

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Product Approval Process

Pharmaceutical products are subject to extensive regulation by the FDA. The FFDCA, and other federal and state statutes and regulations, govern, among other things, the research, development, testing, manufacture, storage, recordkeeping, approval, labeling, promotion and marketing, distribution, post-approval monitoring and reporting, sampling, and import and export of pharmaceutical products. Failure to comply with applicable U.S. requirements may subject a company to a variety of administrative or judicial sanctions, such as FDA refusal to approve pending NDAs, warning or untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties and criminal prosecution.

Pharmaceutical product development for a new product or certain changes to an approved product in the United States typically involves preclinical laboratory and animal tests, the submission to the FDA of an investigational new drug, or IND, which must become effective before clinical testing may commence, and adequate and well-controlled clinical trials to establish the safety and effectiveness of the drug for each indication for which FDA approval is sought. Satisfaction of FDA pre-market approval requirements typically takes many years and the actual time required may vary substantially based upon the type, complexity and novelty of the product or disease.

Preclinical tests include laboratory evaluation of product chemistry, formulation and toxicity, as well as animal trials to assess the characteristics and potential safety and efficacy of the product. The conduct of the preclinical tests must comply with federal regulations and requirements, including good laboratory practices. The results of preclinical testing are submitted to the FDA as part of an Investigational New Drug Application (“IND”) along with other information, including information about product chemistry, manufacturing and controls, and a proposed clinical trial protocol. Long term preclinical tests, such as animal tests of reproductive toxicity and carcinogenicity, may continue after the IND is submitted.

The FDA’s Center for Drug Evaluation and Research fosters early communications between sponsors and new drug review divisions to provide guidance on the data necessary to warrant IND submission, and a 30-day waiting period after the submission of each IND is required prior to the commencement of clinical testing in humans. If the FDA has neither commented on nor questioned the IND within this 30-day period, the clinical trial proposed in the IND may begin.

Clinical trials involve the administration of the IND to healthy volunteers or patients under the supervision of a qualified investigator. Clinical trials must be conducted: (i) in compliance with federal regulations; (ii) in compliance with good clinical practice, or GCP, an international standard meant to protect the rights and health of patients and to define the roles of clinical trial sponsors, administrators, and monitors; as well as (iii) under protocols detailing the objectives of the trial, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated. Each protocol involving testing on U.S. patients and subsequent protocol amendments must be submitted to the FDA as part of the IND.

The FDA may order the temporary or permanent discontinuation of a clinical trial at any time, or impose other sanctions, if it believes that the clinical trial is not being conducted in accordance with FDA requirements or presents an unacceptable risk to the clinical trial patients. The study protocol and informed consent information for patients in clinical trials must also be submitted to an institutional review board, or IRB, for approval. An IRB may also require the clinical trial at the site to be halted, either temporarily or permanently, for failure to comply with the IRB’s requirements, or may impose other conditions.

Clinical trials to support NDAs for marketing approval are typically conducted in three sequential phases, but the phases may overlap. In Phase 1, after the initial introduction of the drug into healthy human subjects or patients, the drug is tested to assess metabolism, pharmacokinetics, pharmacological actions, side effects

 

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associated with increasing doses, and, if possible, early evidence on effectiveness. Phase 2 usually involves trials in a limited patient population to determine the effectiveness of the drug for a particular indication, dosage tolerance, and optimum dosage, and to identify common adverse effects and safety risks. If a compound demonstrates evidence of effectiveness and an acceptable safety profile in Phase 2 evaluations, Phase 3 trials are undertaken to obtain the additional information about clinical efficacy and safety in a larger number of patients, typically at geographically dispersed clinical trial sites, to permit the FDA to evaluate the overall benefit-risk relationship of the drug and to provide adequate information for the labeling of the drug. In most cases the FDA requires two adequate and well-controlled Phase 3 clinical trials to demonstrate the efficacy of the drug. A single Phase 3 trial with other confirmatory evidence may be sufficient in instances where the study is a large multicenter trial demonstrating internal consistency and a statistically persuasive finding of a clinically meaningful effect on mortality, irreversible morbidity or prevention of a disease with a potentially serious outcome and confirmation of the result in a second trial would be practically or ethically impossible.

In addition, the manufacturer of an investigational drug in a Phase 2 or Phase 3 clinical trial for a serious or life-threatening disease is required to make available, such as by posting on its website, its policy on evaluating and responding to requests for expanded access.

After completion of the required clinical testing, an NDA is prepared and submitted to the FDA. FDA approval of the NDA is required before marketing of the product may begin in the United States. The NDA must include the results of all preclinical, clinical and other testing and a compilation of data relating to the product’s pharmacology, chemistry, manufacture and controls. The cost of preparing and submitting an NDA is substantial. The submission of most NDAs is additionally subject to a substantial application user fee, currently $2,875,842 for fiscal year 2021. Under an approved NDA, the applicant is subject to an annual program fee, currently $336,432 per prescription product for fiscal year 2021. These fees typically increase annually, though the application fee decreased slightly from 2020 to 2021.

The FDA has 60 days from its receipt of an NDA to determine whether the application will be filed based on the agency’s threshold determination that it is sufficiently complete to permit substantive review. If the NDA submission is filed, the FDA reviews the NDA to determine, among other things, whether the proposed product is safe and effective for its intended use. The FDA has agreed to certain performance goals in the review of NDAs. Most such applications for standard review drug products are reviewed within ten to twelve months; most applications for priority review drugs are reviewed in six to eight months. Priority review can be applied to drugs that the FDA determines offer major advances in treatment or provide a treatment where no adequate therapy exists. The review process for both standard and priority review may be extended by the FDA for three additional months to consider certain late-submitted information, or information intended to clarify information already provided in the submission.

The FDA may also refer applications for novel drug products, or drug products that present difficult questions of safety or efficacy, to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved. The FDA is not bound by the recommendation of an advisory committee, but it generally follows such recommendations.

After the FDA evaluates the NDA and the manufacturing facilities, it issues either an approval letter or a complete response letter. A complete response letter generally outlines the deficiencies in the submission and may require substantial additional testing, or information, in order for the FDA to reconsider the application. If, or when, those deficiencies have been addressed to the FDA’s satisfaction in a resubmission of the NDA, the FDA will issue an approval letter. The FDA has committed to reviewing such resubmissions in two or six months depending on the type of information included.

 

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An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. As a condition of NDA approval, the FDA may require a risk evaluation and mitigation strategy, or REMS, to help ensure that the benefits of the drug outweigh the potential risks. REMS can include medication guides, communication plans for healthcare professionals, and elements to assure safe use, or ETASU. ETASU can include, but are not limited to, special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring and the use of patient registries. The requirement for a REMS can materially affect the potential market and profitability of the drug. Moreover, product approval may require substantial post-approval testing and surveillance to monitor the drug’s safety or efficacy. Once granted, product approvals may be withdrawn if compliance with regulatory standards is not maintained or problems are identified following initial marketing.

Changes to some of the conditions established in an approved application, including changes in indications, labeling, or manufacturing processes or facilities, require submission and FDA approval of a new NDA supplement before the change can be implemented. An NDA supplement for a new indication typically requires clinical data similar to that in the original application, and the FDA uses the same procedures and actions in reviewing NDA supplements as it does in reviewing NDAs.

Emergency Use Authorization

Emergency Use Authorization (EUA) authority is designed to allow the FDA to help strengthen public health protections against chemical, biological, radiological, and nuclear (CBRN) threats, including infectious diseases, by facilitating the availability and use of medical countermeasures (MCMs) needed during public health emergencies.

Under Section 564 of the FFDCA, the Commissioner of the FDA, acting under delegated authority from the Secretary of the Department of Health and Human Services (HHS), may issue an EUA authorizing (1) the emergency use of an unapproved drug, an unapproved or uncleared device, or an unlicensed biological product; or (2) an unapproved use of an approved drug, approved or cleared device, or licensed biological product. Before an EUA may be issued, the Secretary of HHS must declare that circumstances exist justifying the authorization based on one of four determinations: (1) A determination by the Secretary of Homeland Security that there is a domestic emergency, or a significant potential for a domestic emergency, involving a heightened risk of attack with a, chemical, biological, radiological, or nuclear (“CBRN”) agent or agents; (2) the identification of a material threat by the Secretary of Homeland Security pursuant to section 319F-2 of the Public Health Service (PHS) Act sufficient to affect national security or the health and security of United States citizens living abroad; (3) a determination by the Secretary of Defense that there is a military emergency, or a significant potential for a military emergency, involving a heightened risk to United States military forces, including personnel operating under the authority of title 10 or title 50, of attack with (i) a biological, chemical, radiological, or nuclear agent or agents; or (ii) an agent or agents that may cause, or are otherwise associated with, an imminently life-threatening and specific risk to United States military forces; or (4) a determination by the Secretary that there is a public health emergency, or a significant potential for a public health emergency, that affects, or has a significant potential to affect, national security or the health and security of United States citizens living abroad, and that involves a CBRN agent or agents, or a disease or condition that may be attributable to such agent or agents.

Based on any of these four determinations, the Secretary of HHS may then declare that circumstances exist that justify the EUA, at which point the FDA Commissioner may issue an EUA if the criteria for issuance of an authorization under section 564 of the FFDCA are met.

On February 4, 2020, pursuant to section 564 the FFDCA, the Secretary of HHS determined that there was a public health emergency that has a significant potential to affect national security or the health and security of United States citizens living abroad and that involved COVID-19.

 

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On March 27, 2020, on the basis of the determination of the Secretary of HHS of a public health emergency that had a significant potential to affect national security or the health and security of United States citizens living abroad and that involved the novel coronavirus, the Secretary of HHS declared that circumstances exist justifying the authorization of emergency use of drugs and biological products during the COVID-19 pandemic, pursuant to section 564 of the FFDCA, subject to the terms of any authorization issued under that section.

Quality Assurance

The FDA regulates the facilities, processes and procedures used to manufacture and market pharmaceutical products in the United States. Manufacturing facilities, including those located outside the United States, must be registered with the FDA and all products made in such facilities must be manufactured in accordance with cGMP regulations enforced by the FDA. Compliance with cGMP regulations requires the dedication of substantial resources and requires significant expenditures. These cGMP standards are particularly stringent for biologic products. The FDA periodically inspects manufacturing facilities and procedures to assure compliance. The FDA may cause a suspension or withdrawal of product approvals if regulatory standards are not maintained. In the event an approved manufacturing facility is required by the FDA to curtail or cease operations, or otherwise becomes inoperable, or a third party contract manufacturing facility faces manufacturing problems, obtaining the required FDA authorization to manufacture at the same or a different manufacturing site could result in production delays, which could adversely affect the Company’s business, results of operations, financial condition and cash flow.

The FDA conducts pre-approval inspections of facilities engaged in the development, manufacture, processing, packing, testing and holding of the products subject to INDs. If the FDA concludes that the facilities to be used do not or did not meet cGMP, GLP or GCP requirements, it will not approve an IND application. Corrective actions to remedy the deficiencies must be performed and are usually verified in a sub-sequent inspection. In addition, manufacturers of both pharmaceutical products and active pharmaceutical ingredients (APIs) used to formulate the product also ordinarily undergo a pre-approval inspection, although the inspection can be waived when the manufacturer has had a passing cGMP inspection in the immediate past. Failure of any facility to pass a pre-approval inspection will result in delayed approval and would have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows.

The FDA also conducts periodic inspections of facilities to assess their cGMP status. If the FDA were to find serious cGMP non-compliance during such an inspection, it could take regulatory actions that could adversely affect the Company’s business, results of operations, financial condition and cash flows. Imported API and other components needed to manufacture products could be rejected by U.S. Customs, usually after conferring with the FDA. In respect to domestic establishments, the FDA could initiate product seizures or request product recalls and seek to enjoin a product’s manufacture and distribution. In certain circumstances, violations could support civil penalties and criminal prosecutions. In addition, if the FDA concludes that a company is not in compliance with cGMP requirements, sanctions may be imposed that include classifying that company as an “unacceptable supplier”, thereby disqualifying that company from selling products to federal agencies.

Marketing

Companies that market pharmaceutical products in the United States are subject to various federal and state laws pertaining to healthcare fraud and abuse, including prohibitions on the offer of payment or acceptance of kickbacks or other remuneration for the purchase of products, such as inducements to potential patients to request the company’s products. Specifically, the federal Anti-Kickback Statute prohibits persons or entities from knowingly and willfully soliciting, receiving, offering or providing remuneration, directly or

 

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indirectly, to induce either the referral of an individual, or the furnishing, recommending, or arranging for a good or service, for which payment may be made under a federal healthcare program, such as the Medicare and Medicaid pro-grams. Due to legislative changes, violations of the Anti-Kickback Statute also carry potential federal False Claims Act liability. Because of the sweeping language of the federal Anti-Kickback Statute, many potentially beneficial business arrangements would be prohibited if the statute were strictly applied. To avoid this outcome, the U.S. Department of Health and Human Services’ Office of Inspector General has published regulations—known as “safe harbors”—that identify exceptions or exemptions to the statute’s prohibitions. Arrangements that do not fit within the safe harbors are not automatically deemed to be illegal, but must be evaluated on a case-by-case basis for compliance with the statute. Additionally, many states have adopted laws similar to the federal Anti-Kickback Statute. Some of these state prohibitions apply to referral of patients for healthcare items or services reimbursed by any third party payer, not only the Medicare and Medicaid programs, and do not contain identical safe harbors.

The Company is unaware of any violations of these laws. However, due to the breadth of the statutory provisions and the absence of uniform guidance in the form of regulations or court decisions, there can be no assurance that its practices will not be challenged under anti-kickback or similar laws. Violations of such restrictions may be punishable by civil and/or criminal sanctions, including fines and civil monetary penalties, as well as the possibility of exclusion from participation in U.S. federal and state healthcare programs (including Medicaid and Medicare). Any liability from such a violation could have a material adverse effect on our business, financial condition, results of operations and cash flows.

In addition, the FDA has the authority to regulate the claims made by a manufacturer in marketing its products to ensure that such claims are true, not misleading, supported by scientific evidence and consistent with the products approved or cleared labeling. Failure to comply with FDA requirements in this regard could result in, among other things, suspensions or withdrawal of approvals, product seizures, injunctions against the manufacture, holding, distribution, marketing and sale of a product, civil and criminal sanctions.

Also, the federal False Claims Act prohibits persons from knowingly filing, or causing to be filed, a false claim to, knowingly concealing or knowingly and improperly avoiding or decreasing an obligation to pay or transmit money or property to, or the knowing use of false statements to obtain payment from, the government. When an entity is determined to have violated the False Claims Act, it may be required to pay up to three times the actual damages sustained by the government, plus civil penalties for each separate false claim. Various states have also enacted laws modeled after the federal False Claims Act. Federal and state authorities and private whistleblower plaintiffs have brought actions against pharmaceutical product manufacturers alleging that the manufacturers’ activities constituted causing healthcare providers to submit false claims, alleging that the manufacturers themselves made false or misleading statements to the federal government, or alleging that the manufacturers improperly promoted their products for “off-label” uses not approved by the FDA, or offered inducements to referral sources that are prohibited by the federal Anti-Kickback Statute. To the extent the Company becomes the subject of any such investigations or litigation, it could be time-consuming and costly to the Company and could have a material adverse effect on its business. In addition, if its activities are found to violate federal or state False Claims Act statutes, it could have a material adverse effect on its business, financial conditions, results of operations and cash flows.

Product Liability

There are potential liability risks that arise from the testing, manufacturing, marketing and sale of pharmaceutical products. In addition to direct expenditures for damages, settlement and defense costs, there is a possibility of adverse publicity as a result of product liability claims. Some plaintiffs have received substantial damage awards in some jurisdictions against pharmaceutical companies based upon claims for injuries allegedly caused by the use of their products. In addition, it may be necessary for the Company to voluntarily or mandatorily recall or withdraw products that do not meet approved specifications or which subsequent data demonstrate may be unsafe or ineffective, which would also result in adverse publicity as well as in costs connected to the recall and loss of revenue.

 

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Health Information Privacy and Security

The administrative simplification section of the Health Insurance Portability and Accountability Act of 1996 and its implementing regulations, collectively “HIPAA”, impose stringent requirements on “covered entities” (healthcare providers, health plans and healthcare clearinghouses) to safeguard the privacy and security of individually identifiable health information. Certain of the Company’s operations may be subject to these requirements. Penalties for non-compliance with these rules include both criminal and civil penalties. In addition, the Health Information Technology for Economic and Clinical Health Act (included in the American Recovery and Reinvestment Act of 2009) and its implementing regulations, collectively “HITECH”, expanded federal health information privacy and security protections. Among other things, HITECH makes certain of HIPAA’s privacy and security standards directly applicable to “business associates” – independent contractors or agents of covered entities that receive or obtain protected health information in connection with providing a service on behalf of a covered entity. HITECH also set forth new notification requirements for certain breaches, increased the civil penalties that may be imposed against covered entities, business associates and possibly other persons for HIPAA violations, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce HIPAA and seek attorney’s fees and costs associated with pursuing federal civil actions.

Legislative and regulatory initiatives at the state and federal levels address concerns about the privacy and security of health information. HITECH expands the health information privacy and security protections under HIPAA and imposes new obligations to notify individuals and the U.S. Department of Health and Human Services Office for Civil Rights, or “OCR”, of breaches of certain unsecured health information. Compliance with these laws and regulations may require the Company to spend substantial sums, including, but not limited to, purchasing new information technology, which could negatively impact financial results. Additionally, if the Company fails to comply with the HIPAA privacy, security and breach notification standards, it could suffer civil penalties of up to USD 1,500,000 per calendar year for violations of an identical standard and criminal penalties of up to USD 250,000 and 10 years in prison for offenses committed with the intent to sell, transfer, or use individually identifiable health information for commercial advantage, personal gain or malicious harm. In addition, healthcare providers will continue to remain subject to any state laws that are more restrictive than the federal privacy regulations. These privacy laws vary by state and could impose additional penalties.

The provisions of HIPAA criminalize situations that previously were handled exclusively civilly through repayments of overpayments, offsets and fines by creating new federal healthcare fraud crimes. Further, as with the federal laws, general state criminal laws may be used to prosecute healthcare fraud and abuse. A violation could subject the Company to penalties, fines and/or possible exclusion from Medicare or Medicaid. Such sanctions could significantly reduce its financial results. Future healthcare legislation and regulation or other changes in the administration of or interpretation of existing legislation or regulations regarding governmental healthcare pro-grams could have an adverse effect on the Company’s business the results of its operations.

Regulation in the European Union

Product development, the regulatory approval process, and safety monitoring of medicinal products and